Germany’s new coalition government comes with an ambitious agenda, explains Sandra Parthie

A strong pro-European agenda dominates Olaf Scholz’ Traffic Light coalition, says Employers' Group of the European Economic and Social Committee member

By Sandra Parthie

Sandra Parthie is a member of the Employers' Group of the European Economic and Social Committee and Head of the Brussels Office of IW Köln, Institut der deutschen Wirtschaft

20 Dec 2021

The newly minted German Chancellor, Olaf Scholz, is no greenhorn on the political scene. He has a long career as mayor of Hamburg, Secretary General of the Social Democratic Party and as a minister and Vice-Chancellor in previous German governing coalitions.

Scholz is heading a tripartite coalition - a first for German politics. Agreeing on real solutions, not just formula compromises, could be difficult within this structure. The coalition, however, has a stable majority in the national parliament and has already found a lot of common ground internally.

Conformity with EU rules, the need for European cooperation and collaboration with EU partners, as well as in European projects and alignment with European standards, feature prominently throughout the coalition agreement. The new government is explicitly stating its desire to define German interests through the prism of European interests.

"After 16 years of CDU and Merkel-led governments, which have been largely seen as rather stagnant and vision-less, there is a strong urge for a change of track and desire for more dynamism"

All coalition parties have a proven track record and clear commitment for a pro-European agenda and acknowledge the responsibilities that lie with Germany, as the largest and economically strongest EU Member State.

Nonetheless, the focus of the government will be domestic as the country faces its own challenges, reforms and investment needs. After 16 years of CDU and Merkel-led governments, which have been largely seen as rather stagnant and vision-less, there is a strong urge for a change of track and desire for more dynamism.

The new government’s to-do list includes upgrading the states’ ability to act by investing in digitalisation of public administration, speeding up planning and permitting procedures and modernising public infrastructure and citizen-oriented public services, also with regard to the Covid19- health policy fall out.

Clearly though, Germany cannot afford to just look inward. The Chancellor’s agenda will be driven by global economic demands and geopolitical concerns guided by the needs of the traditionally strong export-orientation of German business and industry.

German companies have a rather negative outlook on the supply chain bottlenecks and production shortages, especially given the higher demand for manufactured goods.

"Scholz is heading a tripartite coalition - a first for German politics. Agreeing on real solutions, not just formula compromises, could be difficult within this structure. The coalition, however, has a stable majority in the national parliament and has already found a lot of common ground internally"

The coalition partners will have to strike the balance between remaining open to global trade and investment, while acting in industry’s interests securing scarce global resources - from raw materials to talent and market access.

In the European context, the new government promises active involvement in Important Projects of Common European Interest, industrial alliances, investment initiatives for transnational European projects from digital and energy infrastructure projects to a joint rail network to improve the European competitiveness and increase upward economic and social cohesion.

This might however, come to a head with the country’s European partners on the volume of financial support for national economic actors, the conditions for the openness of the European single market and access to global markets.

The new German traffic light coalition has an ambitious agenda - on both a national and European level. This agenda comes with a lot of investment demands, which could bode well for other member states with high investment wishes.

But whether there will be an appetite from a traditionally frugal Germany to support a looser fiscal stance on the European level will depend on the recovery performance of member states that have benefitted from European funding through NextGenEU.

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