Life would be so much easier for Lars Klingbeil if the party he leads, Germany’s centre-left Social Democratic Party (SPD), was as popular with voters as he is.
In February 2025, the bearish 48 year-old won back his Bundestag seat with 42 per cent of the vote, the highest result for any SPD politician in the country.
Meanwhile, his party ended election night on 16.4 per cent, the worst result in its 150-year history, sliding from senior to junior coalition partner to the centre-right Christian Democratic Union (CDU).
After a year sharing power with CDU chancellor Friedrich Merz, the SPD has lost a further three points in the polls. As SPD leader, federal finance minister and vice-chancellor, Klingbeil faces unprecedented pressure on three fronts: to turn around the ailing German economy after a seven-year slide; to prevent his party drifting into single-digit obscurity; and to help re-establish Germany in the EU – and on the world stage – as a country with ideas, ambition and an economic model for the future.
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Klingbeil has no illusions about where Germany finds itself – “jammed” – or the scale of the task in advance of him “to overcome the backlog of the last 20 years”.
“We are in the seventh year of this crisis and it is really affecting our country,” he told foreign press in Berlin this week, listing just some of Germany’s many mistakes of recent years.
There is dependency on Russian gas – a legacy of his political mentor Gerhard Schröder, more of which later. Or a post-pandemic political polarisation that has seen the far-right Alternative for Germany (AfD) surge to 27 per cent in polls.
Germany’s newest political party is more than twice as popular with voters as the SPD, its oldest. Behind that popularity is not firm extremist sentiment, Klingbeil argues, and more mainstream voter frustration at a culture of political standstill, playing-it-safe and point-scoring.
“The majority of citizens of this country are looking at the government and saying: ‘make something happen’,” he says. “Strike a fair path that makes demands of all of us, modernises the country and ensures it is a strong, resilient and sovereign country in the EU.”
It’s a refrain Klingbeil has made for months, warning in a keynote address in March that “whoever clings to the status quo is essentially choosing decline”.
Yet, after a year discussing reform – of income tax, pensions, healthcare, red tape – Klingbeil knows the clingiest status-quo supporters are sitting beside him at the cabinet table.
Balance
Striking a balance can be difficult. Soon after entering government, Klingbeil ensured his SPD, through gritted teeth, backed CDU demands for tighter migration and welfare rules.
But when CDU ministers make proposals to save money, senior SPD officials complain they “rush for cover” when their proposals leak and attract public ire.
Other far-reaching SPD reform projects have been rejected out of hand, Klingbeil complains, including efforts to secure the finances of the public pension and healthcare systems by drawing in previously exempted groups such as civil servants and politicians.
Despite it all Klingbeil insists, in a flat voice, that he enjoys a “trusting” relationship with the chancellor.
Klingbeil sounded more amused after a very vocal falling out last month, over SPD refusal to end the May 1st public holiday: “It’s not a bad thing if you’re shouted at now and then.”
Merz insists he never shouted at anyone and dissent remains over fiscal policy. Particularly contentious is a plan to ease the burden on low- and middle-incomes at a cost of €25 billion annually.
“Top earners with six-figure salaries have to make their contribution,” he said last week. Hours later, Merz went on television to insist that any further burden on top-earners was “out of the question”.
Looking beyond cabinet to his party, Klingbeil faces a dilemma that has already felled many centre-left parties across Europe.
Surveys show that around one-third of Germans remain open to SPD policies as potential voters, yet successive post-election analyses show German voters view the SPD as most interested in providing handouts for the jobless.
Earlier this month, Klingbeil said the SPD “has lost its character as the party of work, as the party that is there for people who work hard”.
It was not quite a Leo Varadkar moment, but it hit home with his party’s left-wing. Klingbeil is the first in his family to finish secondary school or go to university. He grew up in Munster, a small town of 15,000 people in Lower Saxony, where his mother worked in a kiosk and his soldier father drove a taxi to top up his income.
As a pacifist teenager, Klingbeil skipped military service, got an eyebrow piercing and played guitar in his garage rock band, Sleeping Silence.
While his parents were unbothered by his teenage rebellion, Klingbeil recalls his then girlfriend’s father – a military officer – “found it terrible”.
“That really influenced me and impinged on my sense of fair play,” he said recently. The experience left him with little patience for “anyone who thinks they are better than others”.
While that may motivate his backroom reform talks with the CDU, Klingbeil has yet to find the right button – or stick – to get things moving again in Germany.
Complicating matters is how Klingbeil is pushing for swingeing spending cuts despite having more money at his disposal than any finance minister in post-war German history.
Even before last year’s coalition agreement, the CDU and SPD backed a €500 billion “special asset fund” to renovate and rebuild Germany’s creaking rail and road network.
Klingbeil sees such spending as much an investment in democracy as infrastructure.
While this record borrowing is off-balance sheet, the interest repayments are not and Klingbeil has a €60 billion hole to fill in this term’s day-to-day finances.
If, that is, the Merz coalition runs to term. Amid all the time-consuming squabbling, the window for this year-old coalition to achieve anything meaningful is closing fast.
On the table
Klingbeil is pinning his hopes on a June 30th cabinet retreat. He wants all major reform projects on the table and political agreement, at the very least, in advance of the summer break.
It’s an ambitious timeline in Germany’s go-slow political machine. But missing that goal could be disastrous given the political earthquake looming in the eastern state of Saxony-Anhalt.
Next September, polls suggest the far-right Alternative for Germany (AfD) will score its first election win, possibly even securing an absolute majority if, as is likely, voters oust the SPD from the parliament in Magdeburg.
Given shifts like that, Klingbeil sees an odd lack of urgency among many political colleagues at home and at European level.
“I have a problem with how politics these days is increasingly divided into who got their way and who lost,” said Klingbeil. “My goal is that the whole European project wins, that is for me the decisive benchmark.”
Many EU colleagues would point to Berlin, adrift since the late Merkel era, as Europe’s leading retardant to reform.
Klingbeil is aware of that reputation and, on Thursday, invited the so-called E6 finance ministers – France, Italy, Spain, Poland and the Netherlands – to seek a compromise on one of Europe’s many unrealised reform projects.
The capital markets union (CMU) is a decade-old plan to get capital flowing across the EU to the benefit of citizens and companies. German savers alone, Klingbeil noted in March, have €3.6 trillion resting in bank accounts that could be put to work across Europe. In Ireland, the figure is put at about €170 billion.
For Klingbeil a functioning European capital market would be a “game-changer”, a European equivalent of the Wall Street financial market. Yet many countries – including Ireland – are wary of plans for a single CMU supervisor.
“My clear message: we are ready to make compromises,” Klingbeil says. He urges his EU finance colleagues to recognise that “this era of geostrategic upheaval” requires urgent compromise to release more secure, European sources of finance.
“I ask myself sometimes if everyone in Europe has realised all we have to do to drive on the resilience and sovereignty of this continent?” he says. “That’s why, more important for me than the question of ‘who won?’ is: ‘are we making progress?’”
For all his talk of greater European co-operation and compromise, the German finance minister has the back of Commerzbank, Germany’s second-largest lender, against a hostile takeover bid by Italy’s Unicredit.
While Klingbeil’s officials use unprintable language to describe UniCredit chief executive Andrea Orcel, Klingbeil is more diplomatic on the record, saying: “Commerzbank is a very important actor when it comes to supporting German SMEs abroad and has a huge significance for Frankfurt as a finance marketplace.”
And what of Europe as a digital marketplace? Days after Pope Leo called for “robust” regulation of AI, Klingbeil says he prefers to see chances rather than risks of new technologies. But the risks are obvious “in a future where digital development in Europe is decided by Elon Musk and Peter Thiel”, co-founder of PayPal and Palantir.
Musk and Thiel are at war with the EU, Klingbeil argues, because “they know that Europe, perhaps alongside the US, is the only instance that, politically, can regulate them effectively”.
Perhaps in a taste of more to come, the Berlin cabinet this week signed off on new plans requiring Netflix and other streaming services to reinvest up to 12 per cent of sales in other European projects, up from a previous maximum of 2.5 per cent.
Iran
Looking beyond Europe, Klingbeil is hostile towards the US war on Iran which, on Wednesday, Germany’s leading economic advisers blamed for halving their growth forecast for 2026 to 0.5 per cent.
Mindful of Trump fury at the reticence of European Nato countries to get involved in “this war we didn’t start”, Klingbeil adds: “When we have a peace situation we are prepared to consider how we could provide support.”
On military matters, Klingbeil is as pragmatic as he is on public finances. His teenage antipathy towards defence and security shifted after September 11th, 2001, he says. His constituency is home to many military bases and arms plants, crucial sources of employment and tax revenue.
Then there is the trigger for Germany’s rearmament: Russia. In October 2022, Klingbeil accused his predecessors of wilful blindness towards Vladimir Putin’s ambitions for Russia’s neighbours.
“Looking for common ground, we often overlooked what divided us,” he says, including respect for the rule of law and national borders.
The traditionally Russia-friendly SPD was caught off guard in 2022, he admits, yet it was an SPD-lead coalition that, overnight, diversified Germany’s energy supply. And it was the SPD, with deep roots in the pacifist movement, that presented the unprecedented “Zeitenwende” blank cheque for German rearmament.
In the years since, Klingbeil has stood firm against efforts in the SPD to soften its stance on Russia. But his most painful realisation of recent years is the role played in all this by his political mentor, Gerhard Schröder.
Some 25 years ago, Klingbeil’s introduction to politics came as a volunteer in Schröder’s constituency office. The two remained close for the next two decades, even as Schröder backed gas pipelines controlled by a Russian energy consortium and then joined as a board member.
More with regret than anger, Klingbeil speaks of a “break” with the 82 year-old. Just as far apart as their Russia politics are their leadership styles.
Where Schröder was known as the “basta chancellor”, a cigar-smoking dealmaker with a wolfish smile and a table-pounding decision-making style, the dimpled Klingbeil is described by many as “nice Lars”.
“Just because he is friendly doesn’t mean he’s a push-over,” says one senior adviser. “It is worth listening to him carefully. When he says ‘we could do something’ then he means ‘we will’.”
Despite his nickname, “nice Lars” has several strings – and scalps – to his name. As SPD general secretary, he engineered the party’s 2021 federal election victory that brought Olaf Scholz to power. That same year, “nice Lars” ousted ineffective SPD leaders and, last year, sidelined his party co-leader.
As for those who criticise the Klingbeil reform push as political piecemeal rather than structural big bang? His officials point to the Angela Merkel precedent.
Germany’s first woman leader surfed a decade-long prosperity wave triggered in large part by Schröder reforms. During the 2003 Bundestag debate, though, her initial verdict was withering: “That was no great masterstroke.”
Not yet 50, Klingbeil insists that he – and his party – are in it for the long haul. After a year pushing the political reform plough, he has a sober view: “Sometimes it can be difficult to get from the headline to the concrete.”
