Olaf Scholz' economic 'Germany pact': Substance or spin?

Things are not going well in Germany. The country's economic power is weakening. Industry is struggling amid high energy costs and too much bureaucracy; companies' order books are emptying out. The progress of digitalization is sluggish, infrastructure is dilapidated, and the construction industry has outright collapsed. Inflation has sent prices soaring, people are buying less.

Economic research institutes have revised their outlooks for Germany — downwards. The recession forecast a couple of weeks ago is set to be much worse than expected. The British magazine The Economist recently posed the question of whether Germany was once again "the sick man of Europe."

The chancellor calls first for patience…

These are problems the German government cannot ignore, but in recent weeks Chancellor Olaf Scholz has not seemed particularly worried. "Difficulties are being talked up which have nothing to do with the real strength of the German economy," he said at an Augsburger Allgemeine event in August.

Scholz's message up till now has been that his government — a coalition of his center-left Social Democrats (SPD), the environmentalist Greens and the neoliberal Free Democrats (FDP) — has launched numerous draft laws focused on securing Germany's energy supply and creating more skilled workers. Now Germans just need to be patient while these big plans bear fruit.

… and then urgency

That makes the chancellor's performance in the Bundestag parliament on Wednesday, when he defended his government's proposed budget, all the more surprising. Scholz had changed not only in appearance — sporting a black eye patch and scratched face, the result of a jogging injury sustained earlier in the week — but in attitude. Instead of patience, he was suddenly demanding urgency. "The citizens are fed up with this standstill, and I am too," he told the assembled lawmakers in the much-anticipated "general debate."

The chancellor called for a "national effort" to get Germany "whipped into shape again." To do so, everyone needed to cooperate and pull together: the federal government, the state governments, the city and municipal authorities, as well as companies, business associations, trade unions, and what Scholz called the "democratic opposition" — by which he meant all the major political parties that weren't the far-right Alternative for Germany (AfD).

Scholz named his new initiative his "Deutschlandpakt," or "Germany pact." Together the country must "shake off red tape, risk averseness and despondency," because these "paralyze our economy and frustrate the people in the country who simply want Germany to function properly."

The opposition is not amused

In response to this call-to-arms, the conservative opposition parties in the Bundestag — comprising the Christian Democratic Union (CDU) and its Bavarian ally the Christian Social Union (CSU) — concluded that the chancellor must be unable to accomplish his plans himself and is using the "Germany pact" in an attempt to build new majorities.

"If large parts of your coalition has gone missing then we are, of course, available," the CSU politician and former Transport Minister Alexander Dobrindt said in the Bundestag.

However, Scholz' call for solidarity is directed more toward the states and local authorities than the opposition. That is because under Germany's federal system, the national government in Berlin depends on state governments in many policy areas. It is not only the Bundestag that decides on planned legislation, but in many cases also the Bundesrat — the parliamentary body that represents the 16 federal states.

CDU premier feels he's being taken for a fool

That is why the swift reaction from the state premier of North-Rhine Westphalia carries some weight. Hendrik Wüst of the CDU was outraged at the chancellor's proposal. The "Germany pact" was no more than a "PR (public relations) gag," he said, before declaring that, as a state premier, he felt he was being taken for a fool.

As far as Wüst is concerned, Scholz's new goals and actions are nothing new. In fact, the bills listed by Scholz in the Bundestag correspond with what his cabinet launched following a behind-closed-doors meeting in Meseberg in late August. Speeding up planned infrastructure projects, said Wüst, is something the federal states have long called for. "For months, there was no response from the chancellery," he said. "The federal government has wasted valuable time — to the detriment of Germany as a place for doing business."

Similar tones are coming from the business community. "With the announced Germany Pact, the German government is finally waking up," said Rainer Dulger, President of the Confederation of German Employers' Associations (BDA), in a newspaper interview. For too long, he said, the government had been sluggish on digitalization and clung to bureaucratic hurdles that were hampering business. This must now change quickly, he said.

In contrast, Olaf Scholz has received broad support from the premiers of the states where the SPD is in power. Following a conference of the state leaders in Brussels, Brandenburg State Premier Dietmar Woidke said there was complete agreement that: "In Germany we are too complicated, we are too slow and in the end that makes us too expensive. We need to become simpler and quicker." Woidke is hoping for a new impetus in expanding railway lines, among other things. "The states will sit down with the federal government as soon as possible so that concrete decisions can finally be made."

Ella Rose Joyner contributed to this report.

This article was orginally written in German.

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