Economic Divisions Shape German Politics Too
Posted by hkarner - 7. März 2017
Source: The Wall Street Journal By SIMON NIXON
Social Democrats’ pick to run against Chancellor Angela Merkel could change dynamics of race
BERLIN—This year has already produced more than its share of political excitement in Europe. The French presidential election campaign is wide open just two months before polling day; the Dutch elections could see 13 parties returned to parliament; and Italy’s ruling Democratic Party appears to be splintering.
Now it is German politics that looks increasingly up in the air.
The Social Democratic Party’s decision to adopt the former European Parliament president, Martin Schulz, as its candidate for chancellor in September’s parliamentary elections has transformed the political landscape.
The SPD, as the party is known, has surged in the polls, with some putting it ahead of Chancellor Angela Merkel’s Christian Democrats for the first time in a decade, raising the prospect that her grip on power may finally be weakening after 12 years.
Mr. Schulz’s opponents insist that he is simply benefiting from the traditional honeymoon afforded to new political faces. Although a veteran of the Brussels scene, he is relatively unknown domestically.
He isn’t tainted by the SPD’s inevitable compromises as the junior partner in Ms. Merkel’s governing coalition; nor was he complicit in Agenda 2010, the sweeping welfare overhaul introduced by the SPD in the early 2000s.
Those changes transformed Germany’s economic fortunes but cost the SPD a chunk of its traditional working-class voter base, which blames Agenda 2010 for holding down wages.
Those who believe that Mr. Schulz’s honeymoon is likely to be short-lived also point to Ms. Merkel’s personal approval ratings, which remain well above 50%. That is hardly consistent with a country seething with rebellion.
But is this too complacent? Could the surge in support for the SPD be evidence that Germany is in fact eager for change? After all, Germany shares many of the social and economic conditions that led to political shocks in the U.S. and U.K. and are driving political turbulence in Europe.
Indeed, Germany itself experienced a political shock last year when the right-wing Alternative for Germany, or AfD, performed strongly in regional elections. That was widely seen as a protest vote driven by public anger at Ms. Merkel’s alleged mishandling of the migration crisis.
The conventional wisdom was that after a decade of strong growth and falling unemployment, there was little political division over Germany’s economic direction; the real political divisions in Germany have been widely assumed to be cultural, reflected in hostility to Muslims.
Yet the reality is that there are deep economic divisions in Germany, as there are in every other developed economy; not everyone has benefited equally from Germany’s economic resurgence or from globalization.
Germany is as deeply divided as any society in Europe, according to Marcel Fratzcher, president of DIW Berlin, a respected think tank. Poverty—defined as those living on less than 60% of median income—is higher than the European average.
When the government in 2015 raised the minimum hourly wage to €8 (about $8.50 today)—still about 10% below the minimum wage in France—more than one in ten Germans received a wage increase.
While Germany’s exporters have benefited from high productivity and high wages, its large nontradeable sectors, which include the public sector and domestic-service providers, are held back by excessive regulation that restricts competition and innovation, limiting productivity and wage growth, says Mr. Fratzcher.
This has created fertile territory for Mr. Schulz, who appears poised to take his party leftward, even reopening the debate over Agenda 2010. In doing so, he has been able to draw support from the AfD, which has no set position on the economy or any other policy area, being united only in its opposition to immigration.
If he can maintain his current popularity at the expense of the extremes, he stands a real chance of emerging from the elections at the head of a new “grand coalition” with the Christian Democrats, or the leader of a new left-wing coalition that includes the former communist Left party and the Greens.
That would certainly mark Germany out from other European countries, where arguably, it has been the lack of a credible mainstream alternative to the status quo that has been driving support for populist parties.
It also poses a challenge for Ms. Merkel. Some in her own party want her to commit to an ambitious, conservative reform agenda that would enable Germany to share the benefits of globalization more equally.
Such an Agenda 2025 could include policies to promote desperately needed investment in Germany’s crumbling infrastructure, overhauls of the education system to better equip workers for the digital economy, deregulate services and address inter-generation fairness by raising the retirement age to allow for tax cuts for current workers.
Yet there is little evidence that Ms. Merkel wishes to embrace such radical change. That has never been her style over the past 12 years, even as she has exhorted ambitious structural reforms on the rest of Europe.
Ms. Merkel appears ready to bet that contented Germany will opt for the status quo. But the lesson from the rest of Europe is that in 2017 the status quo may no longer be enough.