Olaf Scholz, Germany’s ninth and arguably most trouble-torn post-second world war chancellor, has resisted being shunted aside in favour of Boris Pistorius, his popular defence minister. But he still looks likely to become the first European political victim of Donald Trump, due to be inaugurated in January as America’s 47th president. Trump’s election win opened up Germany’s export-geared economy to the threat of tariffs on American sales, exacerbated its dilemma over the relationship with China and sharpened the need to redefine policies over weapons sales to Ukraine.
Scholz, now governing without a parliamentary majority following the collapse of the coalition on 6 November, has faced rising pressure to give way to Pistorius as chancellor-candidate for the Social Democratic Party (SPD) in Germany’s 23 February general election.
However, Pistorius on 21 November declared that he was not available to front the election campaign, throwing his weight behind Scholz and potentially opening the path to a still heavier SPD defeat. As a result of the wrangling of the past few days, Scholz’s standing has been damaged further, within his party and with the wider electorate.
Pistorius may have reasoned his own status will be higher if he allows Scholz alone to take the blame for what is likely to be a catastrophic SPD showing in February. But by declining to ditch Scholz, the party’s basis for maintaining a hold on government, potentially as junior partner in a new conservative-led coalition, has been irretrievably weakened.
With government effectively paralysed, the next few months seem likely to be arduous for both the SPD and Germany. But Scholz’s eventual departure could help lift some of the excessive pessimism enveloping the German economy and lead to outcomes that would steady financial markets.
SPD fissures over social and economic priorities and Russo-Ukrainian war
The chancellor is a stubborn as well as imperturbable man. He draws heavily on the SPD’s against-the-odds success in the 2021 general election, but he knows he has many detractors within the party, having lost an internal vote to become chairman in 2019.
The SPD suffers from a disastrously low opinion poll rating. It is riven by fissures over pressing social and economic priorities as well as on the Russo-Ukrainian war. Making way for another chancellor-candidate would probably only marginally improve the SPD’s negligible chances of winning on 23 February.
Shunting aside Scholz might however have strengthened the opportunity for the SPD to team up afterwards in a relatively stable ‘grand coalition’ led by the Christian Democrat and Christian Social parties (CDU/CSU). They have already chosen Friedrich Merz, the CDU chairman, as their candidate – currently riding high in opinion polls.
The prospect of a stable government under Merz could help shore up a Nato consensus over arming Ukraine ahead of a push for a peace deal on Russian terms expected to be espoused by Trump once he takes office. And it would reassure financial markets by smoothing the way towards reforming the German constitutional ‘debt brake’, regarded as a substantial impediment on much-needed German infrastructure investment. Merz has already said he is open to such a shift. The Bundesbank, among other German entities, has been working on a new fiscal framework that would give greater weight to investment in government borrowing.
Counterpoint to publication of Merkel’s reflections on 16 years in office
Scholz’s travails provide an intriguing counterpoint to publication on 26 November of Merkel’s reflections on 16 years in office. Her memoirs will provide background to Germany’s economic and political problems, given her controversial decisions over immigration, European integration, closing down nuclear power stations and gas deliveries from Russia. Merkel’s book, coupled with growing criticism of her lengthy rule, might provide additional benefit to Merz, in view of the two CDU politicians’ long-standing adversarial relationship.
The CDU/CSU would gain 32% of votes, according to latest opinion polls, well ahead of 16% for the SPD and 12% for the Greens, the remaining two members of Scholz’s minority government. Scholz sacked his finance minister, Christian Lindner, after the leader of the liberal Free Democratic Party drew up a free-market policy paper, leaked on 1 November in an apparently deliberate attempt to sow divisions with cabinet ranks. Lindner’s party is polling 4%, below the level necessary for Bundestag representation, indicating that his gamble over gaining popularity by provoking the coalition breakdown has not yet paid off.
A CDU/CSU-SPD partnership under Merz’s leadership would probably be more sustainable and less risky than the alternatives – a link between the CDU/CSU and either the Greens or the FDP, or both, after the February election.
David Marsh is Chairman of OMFIF. Andreas Meyer-Schwickerath is a Berlin-based OMFIF adviser.
