Derek Scally: Scholz and SPD must look to East and West

Pipeline permit decision will shape dealings with US, Moscow and neighbours

After four failed attempts, Olaf Scholz and his Social Democratic Party (SPD) won September’s federal election and took back Berlin’s chancellery this week because they dared something new.

After years of sorry/not-sorry infighting over long-passed economic and social reforms, the Scholz-lead SPD campaign looked forward and promised voters the most ambitious and progressive government in two decades.

The pitch worked and, when the Merkel era of grand coalitions ended this week, it was replaced with a “traffic light” coalition. After 16 years of centrist stability, Berlin is shifting Germany gently to the left, with liberal and green slants.

The SPD has made a peace offering to traditional working-class voters alienated by the 2003 reforms under Schröder

Despite ongoing pandemic challenges – and debt – Berlin’s new government is promising an overhaul of SPD’s controversial 2003 reforms. A €12 minimum wage will offer a pay increase for 10 million people, and increased welfare payments to nearly four million households with children and those at risk of poverty.

Just as crucial as the money are plans to end the mistrustful, mean-spirited air of the SPD’s 2003 welfare reforms, in particular the intrusive – and often humiliating – qualification checks.

With that, the SPD, pushed by its influential leftist wing, has made a peace offering to traditional working-class voters alienated by the 2003 reforms under Gerhard Schröder, the last SPD chancellor.

Progressive social policies

Younger SPD and Green voters, meanwhile, can look forward to progressive social policies that will allow lesbian couples have both their names on their child’s birth certificate.

Trans people will no longer have to go to court to set their gender while public health insurance will, in future, cover the cost of reassignment surgery.

The third coalition party, the liberal Free Democratic Party (FDP), kept key election promises: no tax increases and a planned return to balanced budgets by 2023.

The SPD hopes for a multiterm run in power, inspired by its two previous periods leading government. The SPD-FDP social liberal era, lasting 13 years until 1982, increased welfare payments, prioritised civil rights – in particular for women and homosexuals – and opened university doors to students from low-income families.

With remarkable timing, the Moscow-Kiev standoff has forced SPD foreign policy chickens to come home to roost

The seven-year SPD-Green alliance, lead by Schröder from 1998, brought climate politics into the political mainstream, liberalised citizenship rules and introduced same-sex civil partnerships.

Beyond domestic policy, the traffic light coalition’s plans are less clear. Green Party co-leader Annalena Baerbock, now foreign minister, promised this week to prioritise “the rule of law and human rights”. With an eye on Warsaw, she vowed she would “not allow our European foundation crumble away”.

But, before she got too far, a senior SPD figure reminded her – on national radio – that key foreign policy will, as in previous administrations, be steered from the chancellery.

Ukrainian border

Olaf Scholz would rather continue his predecessor’s geopolitical pragmatism but the Russian troop build-up on the Ukrainian border will force him to show his hand and choose his path: the Ostpolitik and détente route of post-war Germany’s first SPD chancellor Willy Brandt, or his successor Helmut Schmidt’s more robust pro-Washington/Nato approach.

With remarkable timing, the new Moscow-Kiev standoff has forced old SPD foreign policy chickens to come home to roost. For that Scholz can thank his former boss Schröder.

Before he left office in 2005 and transitioned to consultant for Russia’s state gas company Gazprom, Schröder’s government backed the Nordstream plan for undersea pipelines bringing Russian gas directly to Germany.

With the second pipeline just completed, amid Moscow sabre-rattling, Berlin has to decide whether or not to issue an operating permit. Scholz’s decision will colour, for years to come, his administration’s relations with Washington, Moscow and Berlin’s eastern neighbours.

A similar dilemma looms on China. Expectations that a Scholz administration will adopt a more robust joint EU line on Beijing collide with the reality of German economic dependency on the communist state: four out of every 10 Volkswagens are now sold in China.

Energy transition

Decisions on Russia and China will, in turn, mean success or failure for Berlin’s ambitious green energy transition. With the last nuclear power plant going off the grid next year, the Greens have pushed to close the last coal power plants eight years early, in 2030.

Avoiding an energy gap in the next decades means – aside from Russian gas imports – speeding up the planning and rollout of wind turbines, solar panels and a north-south energy pylon “Autobahn”.

The most pressing challenge for the new chancellor comes this weekend at home, with the election of a new SPD general secretary. The likely candidate is Kevin Kühnert, a former leftist enfant terrible who, as head of the SPD youth wing, thwarted the centrist Scholz’s own leadership bid in 2019.

The most pressing challenge comes this weekend at home with the election of a new SPD general secretary

Scholz, as a former leftist radical in younger years, hopes that Kühnert’s political ambitions – and loyal army of young leftist Bundestag MPs – will not trigger post-election rows similar to those in 1999, which ended in the resignation of leftist SPD finance minister Oskar Lafontaine.

In Christian Lindner, Scholz has a finance minister closer to his own political taste. But the liberal FDP leader will need the Midas touch to fund welfare increases and green energy plans – all while keeping tax rates untouched.

On economics and EU affairs, interesting cabinet debates loom between the two. Scholz has brought EU federalists into his inner circle as political advisers alongside progressive economists who, last year, broke with German fiscal orthodoxy to back the EU pandemic emergency fund.

Team Linder appears more inter-governmentalist and, in a nod to traditional ordoliberal economic thinking, vows to return Berlin to effectively balanced budgets by 2023.

Germany’s euro zone neighbours, who hoped for a post-pandemic, post-election conversion in Berlin economic thinking, might need to think again.

Derek Scally is Berlin Corespondent