For several decades, German politics and society have been shaped by two fundamental features – both of which have contributed to an enviable aura of stability. An electoral system embracing proportional representation has reflected and fostered a wider culture of social compromise and pragmatism, including “grand coalition” governments of left and right that would be unthinkable elsewhere. With regard to economic policy, an aversion to debt rooted in dark historical experience has placed a premium on balancing the books – embodied since 2009 in the “debt brake”, a constitutional limit on budget deficits.
In new and challenging times, however, fiscal rules may need revising if treasured consensual traditions are to continue to thrive. Amid recession and renewed austerity, a highly unusual wave of strikes and demonstrations taking place this week point to a country which is becoming disturbingly polarised.
Returning from holiday last week, the Green vice-chancellor, Robert Habeck, was ambushed by farmers over moves to slash agricultural subsidies in the new year. On Monday, convoys of tractors were deployed to bring central Berlin to a halt, at the beginning of eight days of planned protests across the country. Elsewhere, railway workers are planning imminent strike action over pay and conditions, doctors intend to close surgeries unless the health system is given more state support and hauliers furious over higher road tolls are set to mount blockades.
The catalyst for this unrest was a recent ruling by the German constitutional court, which stopped the government diverting emergency credit authorised during the pandemic to a new climate and transformation fund. This coincided with the reintroduction of the debt brake which had been suspended during the crises of the past three years.
The net result has been a huge black hole in the public finances, which the SPD-led government has ill-advisedly attempted to fill through cuts and raising taxes. A more sensible strategy would have been to extend the suspension of the debt brake for at least another year, but this was blocked by the economically liberal finance minister, Christian Lindner. The chancellor, Olaf Scholz, thus finds himself imposing a fiscal contraction on an economy in which GDP fell by 0.3% last year, and where business confidence has hit rock bottom.
Mr Lindner, whose FDP party is the most unpopular member of an increasingly disliked government, is hoping to protect its reputation as a defender of budgetary rigour. But the party likely to profit most from resulting social strife is the far right Alternative für Deutschland, currently polling second nationally and leading in three states due to hold elections this year. In order to keep different sections of society on board during the green transition, and address structural economic problems following Russia’s invasion of Ukraine, the government desperately needs greater financial room for manoeuvre.
Failure to create it is leading to the ominous and divisive consequences that the AfD has already begun to exploit. Following last week’s impromptu confrontation, Mr Habeck expressed his fears over “how heated up the atmosphere … is becoming”. On Monday he released a video cautioning that the farmers’ protests were in danger of being hijacked by rightwing extremists. If the government sticks to a fiscal dogma that is inappropriate for the times, it will do nothing to lower the temperature.
