Recession, social conflict and loss of leadership: why is Germany in crisis?

Thousands of tractors blocked Unter den Linden avenue this Monday, from east Berlin to the emblematic Brandenburg Gate, in a demonstration by German farmers against the policies of the coalition government of social democrats, greens and liberals. They were protesting against the decision to end the subsidy on the price of diesel, an intensive fuel in work vehicles in the countryside.

State aid, of about 2,900 euros per year on average per agricultural property (more than 12 million pesos), was eliminated for a combination of reasons argued by the Greens, on the one hand, and the Liberals, on the other, and accepted by the SPD social democrats. These three parties make up the coalition chaired by Chancellor Olaf Scholz, leader of the SPD. For the greens, stopping diesel subsidization is justified for environmental reasons. For the liberals, due to budgetary rigor.

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It was the last straw for farmers after months of enduring increases in inputs such as fertilizers and feed for livestock, and paying high prices for electricity in their barns and refrigerators, in addition to several years of gradual elimination of pesticides, also for ecological reasons.

“If the farmer dies, it is the country that dies,” said a gigantic banner under the overcast sky of the cold Berlin morning. A few hundred meters away, the Minister of Finance, Christian Lindner, leader of the liberal party (FDP) and promoter of budget cuts, was booed while trying to reason with members of the main union in the countryside..

In an attempt to be heard, he chose to criticize his green allies whose environmental impositions – he argued – cost the Germans a lot. But the whistle continued: the only thing the minister achieved was to anger the environmentalists once again in a new chapter of the increasingly bitter friction between the parties in the government coalition.

The annoyance against environmentalists is growing. “We are victims of ecofascism with these greens who try to save the world when Germany is barely responsible for 2 percent of the planet's CO2 emissions,” Frederick, a forty-something agricultural producer, told the Parisian newspaper Le Figaro and who assures that, for the first time, Once, he will vote for the AfD, the far-right party that is on the rise thanks to a radical discourse against immigration, the European Union and environmentalists.

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The background to the crisis is much more complicated. The once powerful German locomotive has suddenly stopped. In 2023, the economy of the Federal Republic of Germany contracted by 0.3 percent, according to official government figures. After having been the great engine of Europe during the last decade, since 2019 its GDP has barely grown 0.7 percent, while in the European Union as a whole the GDP increased 4 percent; in the United States, 7.5 percent, and in China, above 20 percent.

Poverty, which had been rising slightly over the past decade, fell in the early years of the current decade. But the recession and the elimination of many of the aid that followed the covid-19 pandemic threaten to revive that indicator and put it back above 16 percent of the population.

Minors, especially children from immigrant families, bear the brunt. In the mid-1990s, 1.2 million children lived in poverty. Today there are 3 million. According to spokespersons for the NGO Die Arche, this is reflected in education: 25 percent of primary school students do not know how to read correctly. The shock affects most families: the drop in household consumption (-0.8 percent last year and -1.5 percent since 2019) is another symptom of the crisis.

Until recently, Germany's great pride was its status as an exporter of manufactures, vehicles and machinery, goods that carry the prestigious 'Made in Germany' seal. But industry production fell 2 percent last year, largely due to energy prices that hit Germany in 2022 and, although they eased slightly in 2023, keep production costs high.

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It is the consequence of a political decision that comes from the end of the last century: to ensure the generation of electrical energy largely thanks to gas from Russia.

35 percent of the energy consumed by German industries came from that source, whose prices skyrocketed after the invasion of the Kremlin troops into Ukraine in February 2022, due to the reduction in supply, something that, incidentally, forced the country to reactivate highly polluting coal-fired thermal plants.

And although last year the country managed to obtain gas from other sources and increase the production of renewables (especially wind energy), with which rates moderated a little, the truth is that the blow caused by the rate increases has been Long duration.

The chemical sector, one of the great strengths of German industry, has not been able to raise its head. “The job losses observed there, despite a certain drop in gas and electricity prices, show a structural change in progress, and some product lines, intensive in energy use, are being relocated outside of Germany” Timo Wollmershauser, from the Economic Research Institute, explained to the French newspaper Le Monde a few days ago.

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Added to all of the above is another political decision of several decades: betting on trade with China.

And although for more than three decades the commercial exchange with the eastern power allowed Germany to keep its exports rising, the abrupt slowdown of the Chinese economy – which went from growing at 8 percent annually in the last decade to less than 5 percent percent after the pandemic – has been very expensive for the Germans who today see their total exports fall 5 percent in 2023.

Another bet, both economic and political, is the subject of controversy. After the worsening of the armed conflict in Syria, and with the departure of thousands of refugees who joined the other flows of Turkish, African and Eastern European migrants, the government of Chancellor Angela Merkel (2005-2021) took a gamble for opening the doors and welcoming hundreds of thousands, with the economic argument – ​​not without reason – that this would allow the workforce to be maintained at competitive levels..

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But Germany's fall into recession has changed everything. And the radical right of the AfD party has dedicated itself to blaming this immigration policy for the economic problems, although the evidence points to other causes. The populist anti-immigration discourse has benefited the AfD: in the polls for a possible general election it is the second movement with the highest voting intention after the center-right CDU.

uncertain outlook

The clouds on the horizon are still gray and heavy. In any other country, the Government could use an increase in public spending to try to give a countercyclical boost to the economy with an investment program in areas such as infrastructure, ecological transition or housing, all through a increase in State debt and a greater fiscal deficit.

But German constitutional rules set strict ceilings on public debt and deficits. In November, and based on these limits, the Constitutional Court overturned a provision agreed upon by the government coalition that allowed 60 billion euros to be allocated to the Climate and Transformation Fund and thus give the economy a huge boost..

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The response of the Government and Parliament to the ruling was to declare a state of emergency – as it did in times of pandemic – in order to violate the public debt ceiling and have some 45 billion euros available largely for rate subsidies. of electrical energy and gas.

The justification this time could not be the pandemic, now over, but the war in Ukraine. We will have to see what the Constitutional Court says.

These doubts about the future do little to help recovery. As the expert Wollmershauser explains, “uncertainties delay the recovery because they increase the tendency of consumers to save, while companies and households postpone their investment decisions.”

And they do little to help the unstable government coalition, which in the two years it has been in power has lost much of the support it had. If in 2021, 52 percent of the public supported the management of Chancellor Scholz's executive, now that support barely reaches 33 percent.

As for Scholz himself, his lack of leadership in a tripartite government that makes the news every week for a new internal fight, the ratings are even more severe: in some polls, less than 20 percent of people approve of the Chancellor's job.

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Due to the crisis, Scholz – and with him, his country – has lost leadership in Europe, at a time when the situation in Ukraine demands more than ever that Germany be present. “We are feeling it throughout Europe,” a diplomatic source in Paris told EL TIEMPO, “and we no longer feel that the Berlin-Paris tandem affects the region.”

If the elections were held this year, the Christian Democratic opposition of the CDU would win with 32 percent of the votes, more than double the voting intention for the Social Democrats.

But what worries analysts most is the rise of the most radical right-wing AfD party, which has doubled its potential voters, from 10 percent in the 2021 elections, to 22 percent of voting intention now, one more ingredient which adds to the long list of concerns for a 2024 that does not look good for Germany.

MAURICIO VARGAS LINARES
ANALYSIS[email protected]