Sigmar Gabriel wants to change record, but Merkel still calls the tune

The German centre-left leader says it’s time to break the ‘downward spiral’ of austerity

German deputy chancellor and economis minister Sigmar Gabriel delivers a speech at a conference in Berlin on Tuesday. The party he leads, the SPD, is stuck 15 opinion poll points behind its grand coalition partner, Angela Merkel’s CDU. Photograph: Tobias Schwarz/AFP/Getty Images

German deputy chancellor and economis minister Sigmar Gabriel delivers a speech at a conference in Berlin on Tuesday. The party he leads, the SPD, is stuck 15 opinion poll points behind its grand coalition partner, Angela Merkel’s CDU. Photograph: Tobias Schwarz/AFP/Getty Images

 

After five years of Merkel’s austerity melodies, Germany’s Social Democrat (SPD) leader Sigmar Gabriel wants to change the record. And so the deputy chancellor hosted a conference at his federal economics ministry yesterday, demanding the EU spend as much time and energy pushing investment as it does policing deficits.

Mr Gabriel made a double-headed proposal. First: raise the Maastricht deficit ceiling from three to 3.5 per cent of GDP. Second: lay down investment targets in the euro zone’s Maastricht rulebook that are as binding as existing deficit rules.

“Why are we so precise when it comes to reducing deficits and so general when it comes to growth?” asked Mr Gabriel. The possibility of borrowing more could, he said, “be used to invest in competitiveness as part of structural reform”.

The centre-left leader is anxious to hitch his wagon to the new Juncker commission and its push for greater investment and fiscal flexibility. Mr Gabriel hopes the change of course in Brussels euro zone policy could blow some urgently-needed wind into his SPD’s sails.

Despite delivering on core election promises since returning to power in December 2013, the SPD is stuck 15 opinion poll points behind its grand coalition partner, Angela Merkel’s CDU. Under pressure to close that gap, Mr Gabriel is challenging what Dr Merkel views as the original sin of the Eurocrisis: that watering down the Maastricht debt rules a decade ago, on the SPD’s watch, opened the floodgates to the recent crisis.

The SPD leader disagrees. While France used the rule-change to simply run up more debt, he said, the rule-change allowed Germany free up €20 billion for investment while pushing through a controversial labour market liberalisation, “Agenda 2010”.

If Germany had pushed those reforms while trying to meet Maastricht targets, Mr Gabriel said, “resistance would have been so great that I think we’d have achieved neither”. His logical conclusion from this reading of recent German history: that investment and fiscal flexibility are more effective than undiluted austerity such as applied to Greece.

The time has come, Mr Gabriel argued, to break the “downward spiral” of austerity weakening European economies and politics, and stoking up anti-EU populism. Such populism is now no stranger even in Germany, he said, pointing to the “growing myth that we are the mule in Europe”, shouldering all the burden rather than profiting from the EU.

Though he sketched out the problems and proposed some solutions, the SPD leader declined to challenge Germany’s dominant – Merkellian – euro crisis narrative: a debt crisis caused solely by overspending periphery members. Mr Gabriel’s reticence is understandable. Doing so could raise uncomfortable questions as to why, if the medicine was so bad, the SPD backed – actively and passively – a CDU crisis prescription so unpopular elsewhere on the continent.

Rather than digging down, and probing the eurozone’s malfunctioning of many moving parts, Mr Gabriel insists the blame lies in euro crisis countries themselves. Considering this take, Germany’s opposition Green Party are sceptical their traditional coalition partner can break free from the CDU on the euro, seeing “no real difference” in their diagnosis of the root cause or the road forward.

“The rhetoric is sometimes a little different here and there but the SPD is basically helping carry the Merkel-Schäuble austerity politics in Europe, ” said Mr Sven-Christian Kindler, Green budgetary spokesman in the Bundestag. “The SPD European policy is too German, not European or social democratic enough.”

Even if the SPD leader’s will for real change was there, his political leverage for independent EU policy is limited in Berlin. Take the SPD’s repeated demand for financial transaction tax in the EU. Mr Gabriel called it a question of “moral and political hygiene” yesterday that financial institutions are made shoulder the cost of the banking crisis.

Viewed with little enthusiasm in the CDU, the tax remains in limbo at the CDU-controlled finance ministry. Previously, the SPD blackmailed the CDU into progressing the tax at EU level by threatening to withhold their parliamentary support on crucial euro votes.

Ahead of a looming Bundestag vote on Greece, Mr Gabriel declined to use that leverage yesterday. The revived Greek standoff has, if anything, underlined how euro policy is not controlled by the SPD-controlled economics ministry but at the CDU-controlled finance ministry. Mr Gabriel may have good reasons for wanting to change the euro crisis record in Berlin, but the record player still belongs to Angela Merkel.

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