Merkel’s coalition bickers over ‘wise men’ leadership and rising debt

A bitter row has broken out between Angela Merkel’s coalition partners over who to appoint as chair of the powerful economic council that advises the government, in a sign of rising political tensions ahead of parliamentary elections.

The role will remain unfilled once Lars Feld leaves the council of economic experts at the end of the month, after finance minister Olaf Scholz, a Social Democrat, blocked the economist’s appointment to a third term, against the wishes of Merkel’s party, the Christian Democratic Union.

The argument is one sign of the deep ideological differences between the CDU and SPD over fiscal policy that are set to intensify in the run-up to September’s Bundestag elections. Feld opposes state involvement in the economy, favours tax cuts, and champions the debt brake, a rule anchored in the German constitution which puts a cap on public debt.

The brake, which limits Germany’s budget deficit to just 0.35 per cent of gross domestic product, was suspended last year as Berlin increased spending to cope with the economic fallout of the coronavirus pandemic. The government assumed €130bn of debt in 2020 and is planning to take on €180bn this year, the largest amount in its postwar history.

The CDU wants to return to the old fiscal rules as soon as possible, while many in the SPD, and some leading left-leaning economists, would like to see the brake reformed to allow bigger investments in public services.

A person close to Scholz said his motivation in blocking Feld, who has served on the panel for the last 10 years and as its chairman since March 2020, was to inject “fresh blood” into the body. He said there had only been three instances in its 58-year history when a member served longer than two five-year terms. “It has nothing to do with Feld’s economic views,” he said.

The decision by German finance minister Olaf Scholz, left. to block Lars Feld’s reappointment caused consternation in the CDU © Hannibal Hanschker/Pool/Reuters

But Feld himself said he had irritated many in the SPD by insisting that Germany swiftly return to fiscal orthodoxy after its corona-related spending splurge.

“There are certain forces in the SPD who want more room for manoeuvre and want to reform the debt brake,” Feld said on German radio. He said the SPD’s “politicisation” of the council of experts had “weakened its independence”, a tendency he “deeply regretted”.

First set up in 1963, the panel of experts is referred to in Germany as the “five wise men”, even though two of its current members are women. It issues an annual report on the state of the economy and plays a highly influential role in shaping German economic policy.

The SPD had reportedly put forward its own candidates for the job of chairman, including Jens Südekum, an economics professor at Heinrich Heine University Düsseldorf, and Marcel Fratzscher, head of the DIW economic think-tank, whose views are closer to those of the SPD, especially on the debt brake.

Scholz’s blocking of Feld, who teaches economic policy at Freiburg University, caused consternation in the CDU. Armin Laschet, the party’s leader, described him as “one of the most renowned scholars of the social market economy”.

“In the middle of a pandemic, the SPD finance minister is, with arrogance and ignorance, preventing [Feld] from staying on in the council of experts,” he tweeted. “Particularly now, in this crisis, expertise would be more important than ever before.”

Hans Michelbach, finance spokesman of the CDU’s sister party CSU, said the SPD didn’t need advisers “but claqueurs for their politics of a return to tax increases and public debt”. He added: “Mr Feld stands in the way of that and so must be swept aside.”

Yet Scholz’s move on Feld was hailed by many in his party. “Lars Feld embodies ideological neoliberalism,” said Cansel Kiziltepe MP, the party’s finance spokeswoman.

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