LLast December, on becoming the first German chancellor of the SPD in 16 years, Olaf Scholz asked his aides if there was a plan B for energy if Russia cut off the gas. The answer, Mr. Scholz wrote in an essay published this month, was “no.”
Thus began a year in which the assumptions underlying decades of German prosperity were put to the test. Vladimir Putin’s brutal invasion of Ukraine and his militarization of energy supplies forced Germany to simultaneously end its reliance on Russian gas and rethink a 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 failed to gain the international credit it has deserves for taking over.
Under Mr. Scholz, Germany has become the third largest donor of aid, including arms, to Ukraine. At the same time, he held a line necessary to keep NATO out of the war. At home, the government has effectively managed what Mr. Scholz calls a zeitenwende (turning point) by spending exceptional sums to deal with extraordinary circumstances. As the country accessed alternative sources of gas at breakneck speed and attempted to accelerate the transition to renewable energy, 200 billion euros were borrowed to subsidize high energy bills. Around another 100 billion euros are to be invested in building up the capabilities of a more prominent German army.
This huge amount of borrowing has been classified as an emergency fund, allowing it to be taken off the books. That, in turn, allowed Mr. Scholz to continue part of the centre-left agenda that helped him get elected: the minimum wage was raised, along with social benefits and the state pension ; a popular subsidized public transport pass will be reintroduced in 2023. The coalition government is also making it easier for immigrants to apply for naturalization and citizenship. Some left-leaning critics of Mr. Scholz would like the government to go further and faster on issues such as collective bargaining and fair wages. But a year later, and given the circumstances, it looks like a decent progressive record.
Nevertheless, after a traumatic year described by one SPD MP as “absolutely crazy”, the future looks just as difficult for Mr Scholz and his coalition partners. In the polls, as the cost of living crisis rages, the SPD is far behind the opposition CDU. In the East, resentment at the expense of support for Ukraine’s resistance to Mr. Putin is mounting. Police raids across the country last week, which foiled a far-right plot to overthrow the state, confirmed the threat posed by radicalized fringe extremists in an era of permacrisy.
On the energy front, the impressive rhetoric about the need to accelerate the green transition is not accompanied by facts on the ground. And on contentious European issues such as oil price caps and energy subsidies, other European leaders have accused Mr Scholz of lacking solidarity and taking a “Germany first” approach. The Franco-German relationship, in particular, needs to be repaired.
More fundamentally, Mr. Scholz is tasked with finding an updated business model for Europe’s most powerful economy. Having grown wealthy through export-led growth at a time of strong globalization and economic interdependence, Germany must now navigate a multipolar world in which the United States and China erect barriers. Mr. Putin’s actions have relegated the doctrine of Wandel durch Handel (change through trade) to history. Having successfully averted potential disaster in his first year in office, Mr. Scholz’s premiership will be defined by his ability to find a way to preserve Germany’s economic strengths in a transformed time.