Hope and fear in the EU as the hard line is appointed German finance minister | Germany
Germany’s bigger neighbors watch the country’s new government form with a mixture of hope and fear, amid fears that a budget hardline supporter in a hurry to become the next finance minister brings the continent back to the icy dead ends of the eurozone crisis.
Social Democratic Party (SPD), German Greens and Free Democratic Party (FDP) are set to move closer to a power-sharing deal on “traffic lights” on Friday, with official coalition talks set to start this week next.
The next German Chancellor under such an arrangement, outgoing Social Democratic Finance Minister Olaf Scholz, is a popular figure with the governments of Paris and Rome after breaking away from his country’s frugal stance during the pandemic. “Scholz is not an ideologue, he is a pragmatist, for having contracted a common debt in the Covid recovery plan,” said StÃ©phanie Yon-Courtin, a French MEP ally of Emmanuel Macron.
However, it is the liberal politician who should take over the finance ministry from Scholz who has, as the German news magazine Focus puts it, “half of Europe is shaking in his boots”.
Christian Lindner, the leader of the FDP, barely four years ago called for Greece to be temporarily kicked out of the eurozone and dismissed Macron’s economic plans as making the EU a “Soviet Union-style system”.
In the winter of 2015-16, the 42-year-old’s contemptuous view of one of Germany’s biggest neighbors sparked a minor diplomatic incident during a dinner he attended. attended as guest of honor in Berlin. According to one of the other guests present, Lindner said: âWe cannot use German workers ‘savings accounts to save Italians’ savings. “
It was a blow that drew an icy response from the Italian Ambassador to Berlin. The Italian diplomat raised his hand and reminded Lindner that Italy had contributed to Greece’s bailout funds, which ultimately benefited French and German banks, observing dryly: âIf I remember correctly, it was the Italians. who paid off German debts.
France and Italy argue that it is time to change the Stability and Growth Pact, which sets strict limits on government borrowing. These fiscal rules, stipulating that budget deficits should not exceed 3% of GDP, were suspended at the start of the pandemic until the end of 2022.
The FDP has positioned itself in support of the eight northern European countries, including Austria, Denmark and the Netherlands, who would like the rules to come back into force after the end of the suspension of the pandemic. In its manifesto, the party rejects the idea of ââintroducing additional European taxes as “incompatible with European treaties”.
That the FDP is as hard on the government as it has acted outside is not, however, a given.
While its MEPs sit in the same European Parliament group as those on Macron’s list, the Free Democratic Party has a distinctly German flavor: pro-business and anti-fiscal but largely critical of American-style libertarianism, socially. liberal but allergic to Keynesian government spending. .
When the Free Democrats were last in a coalition with the Social Democrats from 1969 to 1982, they defined their role as the government’s fiscal watchdog. âA watchful eye on public debt and inflation rates is in the DNA of the FDP and all previous German liberal parties,â said Karl-Heinz PaquÃ©, chairman of the Friedrich Naumann Foundation for Freedom, a group reflection affiliated with the FDP.
But during his last term in government, the FDP, as a junior partner of Merkel’s conservatives, discovered the hard way that an inflexible stance on European economic affairs can also work against it. At the end of a legislature marked by parliamentary wrangling over the eurozone crisis, its support fell by nearly 10 percentage points and the party left parliament.
“The two main reasons why the FDP suffered so much after taking office from 2009 to 2013 are that the party did not implement any tax reform and fell into internal wrangling over the inevitable bailout programs needed to do so. in the face of the eurozone crisis, “PaquÃ© said.
âSince then, the party’s libertarian minority has been pushed back. Under Lindner, who took the reins of party leadership three months after the 2013 defeat, PaquÃ© said the FDP had become “more global and pragmatic.”
The Free Democrats’ election result last month was solid – 11.5% of the vote, a minor improvement from 2017 – but barely a triumph, which is one reason the party attracted more in addition the attention to its popularity among first-time voters. And while young FDP supporters are also concerned about intergenerational debt, they don’t necessarily feel attached to the specific tax fetishes the party has clung to in the past.
âWe see that young Germans demand long-term sustainability from politics,â PaquÃ© said. âBut not all of them define sustainability in a purely ecological way like the Greens, but also more broadly, in a technological, social and economic sense. And these young voters are drawn to our philosophy.
The FDP may have declared its intention to return the EU’s fiscal rules to their pre-pandemic situation, but even the main voices of powerful German trade bodies and economic institutes have recently struck a chord.
“The future German government is formed as part of a rapidly evolving political debate,” said Christian Odendahl, chief economist at the Center for European Reform think tank. âThe negative interest rates have eased the fears of the Germans about indebtedness. More importantly, the next government will be required by law to meet specific climate goals.
âThe current promise of the FDP is that these goals can be achieved through a cross-sector cap-and-trade program. What they aren’t saying yet is that such an approach will inevitably lead to higher carbon prices, which they don’t want either. Something will have to give way.
Odendahl said he expected the amount of necessary domestic investment identified by the next German government to set a benchmark for the rest of Europe.
âThe expectation to act as a consensus seeker within Europe weighs on every German finance minister, regardless of party. We can find that the Ministry of Finance will shape Christian Lindner more than it will shape his office. “