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Pragmatist Scholz bridges political differences to become Germany’s heir to Merkel

Less than two years ago Olaf Scholz was licking his wounds after the most bruising defeat in his long career — losing to two little-known left-wingers in the contest to lead Germany’s Social Democrats (SPD). His dream of one day becoming his country’s chancellor had been dealt a near-fatal blow.

But on Wednesday he sealed one of the most remarkable comebacks in German politics. Written off for months as an also-ran, from a party that was dwindling into irrelevance, he stood before a packed hall as Angela Merkel’s presumptive successor.

The occasion was the unveiling of the coalition agreement negotiated by the SPD, Greens and liberals Free Democrats, the fruit of nearly two months of intense negotiations following national elections in September that resulted in a narrow victory for the Social Democrats.

Scholz said his government would usher in a “decade of investment”, and the “biggest industrial modernisation of Germany in more than 100 years”.

“We are united by the will to make this country better, to drive it forward and keep it together,” he said. “We want to dare more progress.” The next government, he said, would “invest massively to ensure Germany remains a world leader”, and turn it into a “pioneer in climate protection”.

The deal envisages aggressive action on climate and huge investments in improving Germany’s shabby infrastructure. But it also enshrines key SPD demands: an increase in minimum wage, a commitment to stable pensions and more social housing.

The coalition brings together strange bedfellows — a Green party that campaigned to relax the country’s strict fiscal rules and invest billions in greening the economy, and an FDP that insisted on a swift return to pre-pandemic economic orthodoxy. That such ideological differences were bridged — and far faster than many expected — is a testament to Scholz’s skills as a negotiator.

It also vindicates the Scholz approach — a pragmatism and moderation which often annoyed left-wingers in his party. Many in the SPD worried that he was too close to Merkel and her Christian Democrats. Indeed, he explicitly campaigned in this year’s election as the continuity candidate, claiming his long experience in government and down-to-earth, unideological manner made him a worthy heir to Merkel.

The message resonated with a voting public alarmed by Covid-19 and already missing the stabilising influence of a chancellor who has governed Germany for 16 years.

But Scholz may soon be forced by circumstance to adopt a different style. “If he really wants to . . . tackle the big tasks of our time, climate change, growing social inequality and digitisation, he’ll be forced to do the opposite of what he’s so far known for: he will have to fight, and to fight with passion,” wrote Veit Medick in Der Spiegel.

In his youth, Scholz was a lot more passionate. When he joined the SPD in 1975 he initially identified with the more radical wing of the party, pledging to “overcome the capitalist economy”. “I’ve definitely become more pragmatic over the years,” he said last August of his youthful militancy.

A labour lawyer in the 1990s, he gradually climbed the ranks in the SPD, becoming general secretary in 2002. In that role he earned the enmity of the left for his strong support of then chancellor Gerhard Schröder’s contentious labour market reforms. He also earned his nickname “Scholz-o-mat”, a reference to his often robotic, monotonous delivery.

Olaf Scholz with then chancellor Gerhard Schröder in 2002 © Reuters

Scholz served as Merkel’s labour minister during the 2008-09 financial crisis and in 2011 was elected mayor of Hamburg, a job he held for seven years. While popular, his reputation was tarnished by violent clashes between anarchists and police during a G20 summit in 2017 that turned parts of the city into a battleground.

When Merkel appointed him finance minister in her last cabinet, he hewed closely to the strict fiscal orthodoxy of his predecessor in the job, Wolfgang Schäuble, who had come to symbolise the austerity policies of post-crisis Europe.

But that changed when the pandemic hit and Scholz helped put together a €420bn programme of support for businesses and workers — one of Europe’s most generous emergency aid packages.

“This is the bazooka, and we will use it to do whatever it takes,” he said in March 2020, echoing the words of former European Central Bank president Mario Draghi during the eurozone debt crisis in 2012.

Scholz took on vast amounts of debt and suspended Germany’s “debt brake”, the constitutional limit on new borrowing. He also played a key role in driving through plans for the EU’s recovery fund, which will channel loans and grants to countries to help them weather the pandemic.

Those expansive fiscal policies endeared Scholz to once-sceptical left-wingers in the SPD and in August 2020 he was named as its candidate for chancellor.

Few fancied his chances: the SPD was languishing at about 14 per cent in the polls, far behind the Greens and Merkel’s CDU. But Scholz benefited from unforced errors by rival candidates and in the last stage of the campaign the SPD pulled ahead. When results came in on September 26 it was clear the party had scored a narrow victory — and that Scholz was to be Germany’s next chancellor.

Scholz earned sincere applause from Social Democrats on Wednesday but the warmest praise came from a rival, Christian Lindner, the FDP leader. Scholz had emerged in the coalition negotiations, he said, as a “strong leader, with the experience and professionalism to take this country into a good future”, he said. “He will be a strong chancellor for Germany.”

Coalition’s legislative priorities

Climate policy

  • Renewables to make up 80 per cent of electricity output by 2030 (previous target had been 65 per cent)

  • Planning procedures for renewables projects to be speeded up, red tape removed

  • New ministry for economy and climate protection

  • Phaseout of coal to happen ‘ideally’ by 2030 (previous target had been 2038).

  • Goal of at least 15m electric cars on German roads by 2030

  • Establish minimum CO2 price of €60/tonne

    Income/welfare

  • Increase in the minimum wage from €9.60 an hour to €12

  • Pensions to be kept stable: there will be no reduction in pensions and no increase in the pensionable age

  • ‘Basic income’ for children to be introduced

  • Cheaper energy for residential customers, thanks to the abolition of the renewables levy on electricity bills

    Housing

  • Germany to build 400,000 flats a year, 100,000 of them subsidised by the state

  • Tougher rent controls, particularly in big cities with high demand; increases capped at 11 per cent over three years (previously 15 per cent)

  • Creation of a ministry for construction

    Social policy

  • Cannabis to be legalised for adults

  • The concept of ‘race’ will be expunged from the German constitution

  • Refugees will be allowed to bring their relatives to Germany.

  • Tough curbs on video surveillance and the storage of communication data.

    Security policy

  • Armed drones to be introduced to better protect Bundeswehr soldiers on foreign deployments

  • Germany to comply with the Nato goal of spending 2 per cent of GDP on the military

    Public finances

  • Constitutional debt brake, currently suspended, to be reinstated in 2023

  • Relief for municipalities with high levels of debt

  • State-owned KfW bank to promote investment into green and digital transformation

  • ‘Super depreciation allowance’ for green and digital investment in 2022 and 2023

  • Give state-owned companies such as Deutsche Bahn more options to mobilise investment


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