No, Germany isn't "more like us"
Unlike their Dutch peers, Berlin’s politicians are re-inventing their government
AIN’T IT ALWAYS THE WAY but the story that flashed up on my screen was nowhere to be found when I searched later. This was a few weeks ago, as the early poll results came through from Germany’s election on September 26. I read the article immediately online, possibly in the Volkskrant or Parool.
Maybe they thought better of it, but in any case the gist of the headline was that German politics had become a little more like the Netherlands’.
A different kind of correspondent would be less bothered by this. It’s not the comparison which bothers me - it’s not a very interesting error, but the underlying conceit is problematic. The often uneasy rapport between Dutch and Germans has deep antecedents, of course, a legacy of long history and two World Wars. Surely that makes it important to get the facts right in any comparison.
Talks to form a coalition government in Berlin are still at the so-called “explanatory” stage, albeit important to scope the terms for a “formal” negotiation. Latest speculation is that a new cabinet led by the centre-left Sozialdemokratische Partei Deutschlands (SPD) will take office by Christmas, probably in coalition with the liberal Freie Demokraten (FDP) and the Greens - of whom more later.
Whether or not that deal can be done, a power-sharing agreement between the SPD, Germany’s oldest political party, and the Greens - an alliance whose full name is Bündnis 90/Die Grünen, following the 1993 merger of parties in West and East Germany - would signal a striking transformation. This backgrounder video from DWNews (prior to the emerging Red-Green axis) has more on the Greens’ evolution from a fringe “anti-party” into a fully-fledged political player.
An emerging red-green alliance taking power in Europe’s biggest economy is worlds apart from the seemingly endless drift of Dutch politics. That’s pretty obvious, but the impulse of a headline writer eager to assert a shared trajectory looks, well, kinda Freudian. At least to my eyes, it's revealing in more ways than the unidentified editor intended.
The Netherlands has been governed by some configuration of the five centrist political parties for a generation. This year’s Dutch parliamentary election in March brought unprecedented gains for both far-Right parties and the liberal D66. That implies a measure of frustration that is well documented and hence no surprise.
This stasis is problematic in ways that often feature in the archives of 2nd Opinion (Free to subscribers, by the way). If and when a new cabinet emerges in the Hague, the current thinking is that it a minority centre/right alliance is likely to exclude the left/green parties. That would be a departure from recent coalitions including the PvdA labour party, but still looks unlikely to deliver any substantive change. The record of previous so-called “purple” cabinets - whether you approve or not - is that the political agenda is stuck.
Not far away, Germany’s system is more fluid. Its example warrants closer examination from Dutch pundits and politicians, if they could overcome an inherent resistance to lessons from Berlin.
A makeover from the middle
At either end of the political spectrum, electoral support for Germany’s political outliers fell well short of their ambitions: the far-right Alternative für Deutschland won 10.3 per cent of votes, while the Left party took 4.9 per cent. Neither side is set to wield much influence.
It’s often said that in politics, Right versus Left are 20th-century terms - derived, incidentally, from the opposing sides of the parliamentary chamber in Westminster. A more relevant polarity for today is Open versus Closed, or Inward versus Outward. Whatever labels you choose, September’s election signalled impatience.
The climate was a dominant issue. Despite a record level of personal popularity for Angela Merkel - after 16 years as chancellor and 21 years at the helm of the Christlich Demokratishche Union - the CDU suffered its worst election result since the Second World War. The longer-term implications are not easy to discern, but that closely fought contest was the catalyst for some contrarian thinking in Berlin.
Political renovation is a German strength, claimed an editorial in the Financial Times (paywall), even while it’s also a measure of underlying stability. What the incoming government does next will have potentially far-reaching consequences across Europe.
The last conclusion to draw is the most important: Germany’s political culture is in good shape. Even when traditional parties seem exhausted, German voters resisted the siren voices of nationalism and populism. The far-left and far-right lost support. German politics is still played in the centre ground. It may be dull sometimes, but it is also something to envy.
Ironically, that’s just the kind of sentiment routinely voiced by admirers of the Dutch system. Prime minister Mark Rutte often reminds voters that the Netherlands is gaaf - a slightly (perhaps deliberately) fogey-ish expression for cool or great, as I reported here. Rutte’s signature talent has been to neutralise, or accommodate, all challengers.
Serial purple-ish alliances dominated by centre-Right parties, but allowing for a red tinge from Dutch Labour, have successfully defended their turf. Probably the best argument in defence of the Dutch system has been the ability of Rutte's coalitions to withstand disruptive influences from the opposition benches (like Geert Wilders’s Freedom Party) and, to date, from coalition insiders (like D66).
Hence the current stasis, as the political and policy terrain in the Netherlands has barely shifted. We are where we are, as Dutch coalition talks in the Hague proceed at a snail’s pace.
The price of green
Politicians in Berlin are embarking on something much more ambitious, if forecasts come to pass. Before a red-green combination can come together, with support from the pro-business liberal FDP, their leaders first need to agree on the principles for an alliance.
The decisive issue is how to fund public investment in new, green infrastructure for a low-carbon economy.
That’s the deal-breaker.
Raising the debt ceiling on public spending defies EU budget rules and the German constitution. The Greens campaigned for a constitutional amendment to sanction this bold shift in policy, but that would require a two-thirds majority. Nobody seriously expects it to happen.
For an incoming government led by the SDP’s Olaf Scholz to invest more in greening the economy without sacrificing EU rules on borrowing will take some political chicanery. Strict rules on new debt have resulted in net public spending of about zero over the past decade. The issue now is “how to create debt inside a shrinking fiscal envelope,” wrote Eric Nielsen, group chief economist at UniCredit, an investment bank.
As so often in Europe’s social democracies, the probable answer lies in more creative accounting to create so-called “off-balance-sheet” incentives. With private investment running at near-capacity of close to 20% of GDP, on a par with other OECD countries, finding the money to pay for green ambitions is a dilemma shared by all rich countries.
The German constitution stipulates that the federal government’s structural fiscal deficit must be limited to 0.35 per cent of gross domestic product. With no realistic hope of a sufficient majority to change the constitution, a number of complicated fiscal constructions are likely...but below the headlines, big changes are likely to come.
As a model for reform, off-balance-sheet incentives are a well-rehearsed way of cooking the books. This kind of financial engineering to unlock private funding paid for new British hospitals in the late 1990s, secured by state guarantees that are not unlike President Joe Biden’s new “big plan” for US infrastructure.
Neilsen’s devil-in-the-detail, less than transparent scenario is “not first-best,” he acknowledges with the characteristic understatement of a Teutonic banker. His choice of words invite cynicism: “Outcomes may be less transparent than expected”. This is creative accounting of a kind devised specifically to circumvent the EU regulations. The very rules that, until recently, were widely seen from southern Europe as a means of enforcing a German model of austerity on other EU member states.
It’s radical. And radically good news.
How to meet the imperative of greening Europe's carbon-intensive industries for a clean energy transition is an existential question. Bruegel, a Brussels-based think tank, estimated the cost of reaching the Paris Climate Agreement goal of net zero by 2050 as equivalent to boosting public investment by 2% of GDP every year for next decade.
More public investment in green infrastructure from Berlin would be an example to Europe that times have indeed changed. If the EU’s sole surviving power broker can solve the conundrum, other governments may follow. Nielsen predicts that German politicians will “almost definitely show the political will and flexibility to finally boost public investment”.
Stop press! From a new coalition in northern Europe: bold moves, a hard-headed approach to light the road to the Paris targets and net zero emissions. No, Germany’s election didn’t make our eastern neighbour a little bit more like the Netherlands.
And in Berlin, a new government might just take office by Christmas.
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