Move fast and break things: German coalition mired in chaos at mid-term mark

Two years after Germany’s first left-leaning coalition in 16 years took office, many of its ambitious reforms are overshadowed by inner contradictions and constant crisis mode.

The election of Chancellor Olaf Scholz (SPD/S&D) two years ago marked the dawn of Germany’s first full-fledged three-party government and the most heterogeneous one in its recent history.

Two years after the government got voted in by the Bundestag, the self-declared ‘progressive coalition’ of SPD, Greens, and the liberal FDP has railroaded an impressive number of ambitious projects. However, infighting, social backlash and a fatal court judgement have fundamentally put into question whether the coalition can continue to work through its inner contradictions.

“You have tried to square the circle and this house of cards has [now] collapsed,” Friedrich Merz (CDU/EPP), the leader of the opposition, summarised the coalition’s situation in parliament last week.

However, when it comes to policy performance, the three parties have managed to ‘square the circle’ to some extent.

A review conducted by the Bertelsmann Foundation earlier this year found that the coalition outperformed its predecessor regarding the number and gravity of implemented reforms.

This applied in particular to the Green-led Economy and Climate Ministry, where the government channelled most of its activities regarding the green transition. 

But the coalition has also waded into cutting bureaucracy and red tape as well as boosting housing construction.

“It must be taken into account as well that government activity was taken over by the consequences of Russia’s war in Ukraine just a few weeks after the handover of power,” the authors of the Bertelsmann review noted.

The unprecedented challenge saw the coalition forced to confront a number of crucial reforms in a matter of weeks.

Notoriously, Scholz called out a ‘Zeitenwende’, an epochal tectonic shift, in Germany’s approach to its defence, vowing to rebuild Germany’s long-neglected armed forces with a €100-billion euro special fund. 

Meanwhile, Green Economy Minister Robert Habeck had his hands full preventing the collapse of Germany’s energy supply after years of nurtured dependence on Russian fossil fuels.

“We have nothing to be ashamed of regarding our progress, we have achieved an enormous amount,” he told ntv in August.

Tensions coming to a head

But Russia’s invasion has not only accelerated a deep transformation – it also papered over the large ideological divides that were opening up over it, in particular between the Greens and the FDP, which even Angela Merkel failed to tame when holding talks for a three-way coalition in 2017.

As the shock waned off, the coalition’s second year has seen those tensions come to a head.

The leaked draft of another large-scale green reform, overseen by Habeck, which would effectively force homeowners to replace fossil-fuel heating systems from 2024, led the FDP to veto the legislation amidst a public outcry.

What followed was a week-long spat with the Greens, crowding out government business and prompting an all-out rhetoric, at the peak of which FDP deputy leader Wolfgang Kubicki even called Habeck “similar to Putin”.

Feuding has not stopped there, with negotiations over the 2024 budget and a new child benefit system also plagued by posturing and intermittent blockade.

A joint cabinet retreat led to a refocus, just for it to be derailed by a court judgement last month, declaring the coalition’s use of a €60-billion euro special investment fund unlawful – the result of yet another attempt at reconciling the coalition’s diverging ideals. 

The coalition’s excessive use of special off-budget pots allowed FDP Finance Minister Christian Lindner to limit Germany’s budget deficit while giving SPD and Greens scope to invest.

Future in doubt

Thus, the ruling has put the coalition’s basic modus operandi and much of its future investment agenda fundamentally in doubt. 

“In the future, there will be a lack of state funding earmarked for the renewal of the economy and infrastructure,” Finance Minister Christian Lindner (FDP/Renew Europe) told tabloid BILD soon after the ruling, while his colleague Habeck disagreed publicly.

The outcome of the coalition’s frantic search for a way to plug its budget hole remains uncertain and so does the future of its collaboration.

Worryingly, the political fallout from a year of coalition controversies has also strained the patience of the public and accelerated the looming rise of the far-right in Germany, which the country had so far been spared from.

As the ‘traffic light’ collectively dipped in the polls, falling below a majority, the main beneficiary has been the far-right AfD, now polling as the second-most popular party behind the CDU. 

Thus, in the mid-term point, the German coalition has to confront fundamental questions on how it can continue as its large-scale transformation project has changed the country in more ways than it could have anticipated.

[Edited by Oliver Noyan/Nathalie Weatherald]

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