There was a time when, in the opinion of many, nothing could go wrong for Germany: it had a strong economy, low unemployment and a successful fiscal consolidation strategy. A broad political consensus provided stability, and German society did not suffer from deep divisions. As former German Chancellor Angela Merkel's campaign slogan said in 2017, Germany was “a country where we live well and happily.”
But at this point, Merkel's slogan (forgotten even by her own party) already sounds like a vain illusion. Today the predominant perception is that Germany no longer manages to do anything well (at least, nothing important). The mood of the population reflects tiredness and pessimism: 46% of Germans believe that in 10 years it will be worse. At the end of 2022, only 28% were hopeful for 2023 (it was the most negative response since 1951).
And they were not wrong: 2023 turned out to be a very bad year for Germany. The economy is experiencing a moderate but persistent recession, and the outlook for 2024 is also negative. A serious and prolonged budget crisis has paralyzed the federal and state governments; The three partners in the government coalition do not stop fighting, and numerous reform attempts have been stalled or abandoned. It is not strange that Krisenmodus (in crisis mode) has been the German word of the year.
Recently, the influential newspaper Frankfurter Allgemeine Zeitung He dedicated an entire page to talking about Germany's biggest problems: 13 in total, many of them self-inflicted. Globalization is slowing and the lack of new markets for German products is putting pressure on the country's export-oriented economy. Furthermore, there is not enough investment, capital markets are very weak, and an aggressive form of technophobia has slowed the digitalization drive.
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And this is just the tip of the iceberg. Germany also suffers from a lack of investment in public infrastructure, excess regulation and bureaucracy, and labor shortages. German society faces a variety of problems, including a dysfunctional immigration system, the high cost of housing, energy prices that are among the highest in Europe and poor educational outcomes.
On the positive side, the newspaper could only identify three encouraging signs: that artificial intelligence is likely to benefit the German industrial core; that the pharmaceutical sector is regaining its former strength, and that the Mittelstand (Germany's dynamic small and medium-sized manufacturing companies) remains resilient and innovative to a certain extent.
What went wrong? There is no doubt that the Covid-19 pandemic, Russian President Vladimir Putin's war in Ukraine (with the resulting energy crisis), the sudden increase in migration and conflicts in the Middle East have contributed to the situation. current. But above all, they have revealed how ill-prepared Germany was to deal with unexpected shocks and geopolitical changes.
Many of these problems have been brewing for a long time: economic and energy dependencies, obsolete administrative systems, regulations that stifle innovation, etc. But German leaders decided to ignore them, and voters went along, convinced that everything would turn out well in the end.
German society has a dysfunctional immigration system, high housing costs and poor educational outcomes
German unease has many causes, but one of the main ones is the (often forgotten) weight of success. It goes for companies and it goes for countries: a good financial situation can generate complacency. In times of steady growth, governments become overconfident and stop paying attention to changes.
This problem was compounded by the importance German voters place on the stability of political leadership and maintaining the status quo. Merkel (who is far from being a visionary politician) suited Germany like a glove, and instead of promoting much-needed reforms she chose gradualism.
The ruling coalition (called Ampelkoalition, or traffic light coalition, due to the colors of the three member parties) was formed with the slogan of “dare to more progress.” But the chancellor, Olaf Scholz, is neither a visionary nor an effective manager for a government plagued by conflict and prone to gaffes.
To the members of the Ampelkoalition It has been practically impossible for them to find common ground. The social democrats pamper their old and dwindling electoral base with taxpayers' money; The Greens have a reformist vision that is increasingly distant from public opinion, and the Liberals repeat the refrain of “not creating more taxes” and “limiting public spending,” while insisting that the constitutional limit on emissions be respected. of debt. If the coalition's political record during its first two years in power is any indication of what is to come, Germans have reason to worry about their country's future.
Germany will undoubtedly pay a price for complacency. Having rested on its laurels for too long, it has been left ill-prepared for today's world, and the ruling coalition's failure to take decisive action has only intensified the problem. And in the social dimension, the broad consensus that united the majority of Germans has weakened, as demonstrated by the increasingly frequent strikes and demonstrations.
Furthermore, the country's political future is uncertain. The right-wing party Alternative für Deutschland (AfD) exceeds 20% in national polls (less than two years ago it was at 10%), and next year it may become the first minority in the parliaments of several states. . In fact, it is possible that the Ampelkoalition does not survive until the next federal election (scheduled for 2025). If calls for early elections intensify, Scholz may try to form a “grand coalition” with the Christian Democrats led by Friedrich Merz (now Chancellor of the shadow cabinet).
If the Ampelkoalition wants to remain in power and correct his dismal performance, Scholz will have to improve his communication with the electorate and explain his Government's policies more frequently and clearly. And all three parties have to realize that if they insist on continuing to talk about their favorite issues while the country is sinking, they will limit their chances of re-election.
The Scholz Government has to seek consensus on three fundamental issues: not to introduce new social programs and not to increase spending on those already underway above inflation; modernize public administration, and make public investment more flexible, for which a reform of the constitutional limit on debt is needed. They may not be very bold changes, but there will be no progress without them.
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