Last December, on becoming Germany’s first SPD chancellor for 16 years, Olaf Scholz asked aides whether there was a plan B for energy should Russia turn off the gas. The answer, Mr Scholz wrote in an essay published this month, was “no”.
So began a year during which the assumptions underlying decades of German prosperity were tested to destruction. Vladimir Putin’s brutal invasion of Ukraine, and his weaponisation of energy supplies, obliged Germany to simultaneously end its dependency on Russian gas and rethink a self-consciously low profile as a military power. Given the scale and moral urgency of the challenge – and Germany’s geopolitical importance – Mr Scholz’s sometimes unwieldy three-party coalition government has not got the international credit it deserves for stepping up to the plate.
Under Mr Scholz, Germany has become the third largest donor of aid, including weapons, to Ukraine. At the same time, it has held a necessary line on keeping Nato out of the war. At home, the government has effectively dealt with what Mr Scholz calls a zeitenwende (turning point) by spending exceptional sums to deal with extraordinary circumstances. As the country has accessed alternative sources of gas at breakneck speed, and tried to speed up the transition to renewable energy, €200bn has been borrowed to subsidise high energy bills. About €100bn more is to be invested in boosting the capabilities of a more high-profile German army.
This enormous amount of borrowing has been classed as an emergency fund – allowing it to be placed off the books. That, in turn, has permitted Mr Scholz to pursue some of the centre-left agenda that helped get him elected: the minimum wage has been raised, along with welfare payments and the state pension; a popular subsidised public transport pass will be reintroduced in 2023. The coalition government is also making it easier for immigrants to apply for naturalisation and citizenship. Some of Mr Scholz’s critics on the left would like the government to go further and faster on issues such as collective bargaining and fair wages. But a year on, and given the circumstances, this looks like a decent progressive record.
Nevertheless, after a traumatic year described by one SPD member of parliament as “absolutely insane”, the future looks just as challenging for Mr Scholz and his coalition partners. In the polls, as the cost of living crisis bites, the SPD is running well behind the CDU opposition. In the east, resentment at the cost of supporting Ukraine’s resistance to Mr Putin is rising. Police raids across the country last week, which thwarted a far-right plot to overthrow the state, confirmed the threat posed by fringe extremists radicalised in an age of permacrisis.
On the energy front, impressive rhetoric on the need to accelerate the green transition is not being matched by facts on the ground. And on vexed European issues such as oil price caps and energy subsidies, other EU leaders have accused Mr Scholz of lacking solidarity and taking a “Germany first” approach. The Franco-German relationship, in particular, is in need of repair.
Most fundamentally, Mr Scholz is tasked with finding an updated business model for Europe’s most powerful economy. Having grown rich through export-led growth in an era of high globalisation and economic interdependency, Germany must now navigate a multipolar world in which both the US and China are erecting barriers. Mr Putin’s actions have consigned the doctrine of Wandel durch Handel (change through trade) to history. Having successfully averted possible disaster during his first year in office, Mr Scholz’s premiership will be defined by his ability to find a way to preserve German economic strengths in transformed times.