Just months after the triumph of the “world’s most powerful woman” that marked the Sept. 22 general election, the mood in Berlin will be more sober this morning when Angela Merkel is elected chancellor for the third time. The announcement of the country’s new leadership team on Dec. 14 marked the end of a difficult negotiation process that had pundits already mapping out alternative scenarios, including new elections, should the deal fall through. At the end, one woman emerged victorious—but it wasn’t Angela Merkel.
Wiry, feisty and the product of political legacy, Ursula von der Leyen will take over as Germany’s first female defense minister. The gynecologist mother of seven and former labor minister will oversee the implementation of a sweeping reform of Germany’s armed services and negotiate Germany’s military presence in Afghanistan post-2014 with NATO allies.
The price of potential failure
Party leaders on both sides had every right to be nervous ahead of the past weekend. Their last experience in a coalition government cost Social Democrats much of their own political identity. In a devastating blow, the 2009 parliamentary vote left the SPD licking its wounds with worst result in the its post-war history. Deeply scarred by this experience, the party leadership opted not only for an aggressive negotiation strategy but for another bold move: putting the final 185-page coalition pact to referendum by its more than 475,000 members. A resounding nein could have sent Christian Democrats back to the drawing board with the left-leaning Green Party, see its hard-won majority pushed aside by a minority government between the marxist Linke, the Greens, and the SPD, or head toward new elections early in 2014. Amid all of Europe’s problems, such as lacking progress on the banking reform, and an increasingly impatient domestic audience three months post-election, failure wasn’t really ever an option.
Die great stagnation—four more years
For its status as the economic beacon of the euro zone, and its demands for reform of the Union’s banking and financial system, Germany needs urgent reforms of its own: Its infrastructure is ailing, its labor market and its pension systems need an overhaul to be equitable among generations. Germany is the “old man of Europe”—aging at a faster rate than any other European neighbor. Its median age is almost three and a half years higher, leaving fewer people in the labor market and more pensioners to support. It has been all but unable to attract and integrate skilled workers to the country to fill looming production gaps.
The German economy has been living off of past glory and the results of reforms introduced in 2003 by Merkel’s Social Democratic predecessor, Gerhard Schröder. That time might be coming to an end. Last week brought news that its industrial production is stalling, exports are slowing and that economic growth projections were showing a meager 0.3%. Labor productivity has grown less than half as fast as Spain, usually Europe’s laggard, over the past 10 years, the Economist reports. Distracted by the euro crisis throughout much of her second term, Angela Merkel has the dubious honor of being one of the least domestically reformist chancellors.
It comes as no surprise, then, that Social Democratic grassroots activists—especially the party’s youth wing—wanted their leadership to “go hard, or go home.” Some agreements came easier than others. It helped that Merkel had spent the last four years steering some of her conservative party hawks more toward the center: A commitment to renewable energy (the so-called Energiewende), away from nuclear and coal was a joint goal—a steady hand in European and foreign policy always a shared objective, even when the parties were rivals across the aisle. Others were a far stickier matter, and not all was won.
The price of power
The SPD did bargain hard for a number of key portfolio issues—even though the country might not be able to afford it. Economists and analysts are puzzling over how Germany intends to pay for the Social Democrats’ biggest “wins,” from rent control to a blanket minimum wage of €8.50 ($11.68) by 2017 to full retirement benefits at 63—all a departure from earlier policies.
Original SPD party leadership plans to pay for these changes with tax hikes on the wealthy, however, were met with opposition by the country’s old and new finance minister, Wolfgang Schäuble, the man who has become synonymous with Germany’s austerity policy and a closed checkbook. With a shrinking labor force and greater pension benefits—now to include mothers and fathers that cared for children full time—Germany’s thirty- and forty-somethings will be paying the price. Existing, temporary surpluses in the pension trust fund would be used to cover existing shortcomings, squeezing younger generations. And so they put their foot down: The SPD’s youth wing collectively voted against the coalition pact, leaving future vice-chancellor and designated economics and energy minister, Sigmar Gabriel, scrambling and actively campaigning for every vote. In the end, he delivered: 75% of all eligible party members said yes. Gabriel and Schäuble will now have to put their heads together on how to finance these policies and support a demographically viable redistribution that doesn’t choke the country’s long-term social and economic expansion – and with it, continued European recovery.
Europe and the world: Waiting for Germany?
Thus, while domestic battles will still need to be fought to help the country retain its exemplary status vis-à-vis its European neighbors, we can expect stability and a stronger voice on European, defense and global policy. Under Merkel II, foreign policy shifted firmly away from Guido Westerwelle—the hapless former foreign minister and erstwhile leader of Merkel’s old coalition partner, the Free Democrats—to the chancellery. This was evident in Germany’s abstention in the UN Security Council vote on Libya as much as in the “blunder” on Syria, which highlighted the lack of true decision-making power in Germany’s foreign ministry.
With the return of one of Germany’s leading foreign policy experts to the ministry, in SPD-man and former chief diplomat, Frank-Walter Steinmeier, expect Germany’s voice to be both better coordinated and more demanding. Already, there is greater emphasis on the importance of the “Weimar triangle”—the partnership between France, Poland and Germany—to consolidate Europe politically from within, against a resurging Russia, reaching far into its former spheres of influence.
Both the SPD and Merkel’s Christian Democrats/Christian Socialists are in favor of expanding the EU to include the Western Balkans. The Social Democrats have long been vocal on EU membership for Turkey. Though originally under some scrutiny for his knowledge of US-spying on German territory, Steinmeier will also play an instrumental role in negotiating a potential “no-spy” agreement with American counterparts to repair the rift that emerged over the summer. Germany will have to formulate a clearer line on its policies toward China and India, beyond putting economic interests first and will have to assume a leadership role in shaping Europe’s still burgeoning foreign policy role, and continued NATO reform, including better force integration.
Steinmeier is a pragmatist—and will be joined in navigating Germany’s diplomatic and defense profile by the true winner of the coalition deliberations and the ministerial power poker: Ursula von der Leyen. A seasoned CDU leader, she is rumored to be positioning herself to be chancellor in 2017, though she herself vehemently denies it. A multi-lingual, political animal, von der Leyen will be the petite force behind Germany’s negotiations with NATO allies on police and troop training units in Afghanistan post-2014. She’ll also have to shepherd potential changes to the role the German parliament plays in deciding on military deployment. Though analysts expect a “reliable” if not downright boring foreign policy from the Germans now, these low expectations and the new, more dynamic duo at the helm of diplomacy and defense has the ability to positively surprise allies.
It was just a week ago that “GroKo”—the German acronym for “Grosse Koalition”—was voted word of the year by the country’s language czars. Both the Economist and German comedians agreed the term evoked a “great crocodile”—hardly the most nimble or regal or inspirational member of the animal kingdom. But it’s an apt metaphor: To maintain its heavyweight status at the heart of Europe and defend its own future generations, this particular political reptile will have to shed its hard exoskeleton for something more nimble, reform-minded, and visionary.