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New German Government - All things change?

Posted: Mar 27, 2018 by Instinctif Partners

Germany finally has a government, and Chancellor Angela Merkel got re-elected into her fourth term – exactly 171 days after the general election last year. It will be presumably also her last term, according to her own statements. With the new government in place, German policy makers need to take on crucial challenges on the backburner of uncertainty over the last half year. It will require fast yet deliberate steps to settle a growing internal social and economic polarisation among the greater society, especially in the Eastern parts of Germany. Also, key transformation challenges in digitalisation or health care finally need to be addressed, and not to forget global issues looming between US, EU, Russia and China.

With a total of six parties in the German Bundestag now including the far-right populist party Alternative für Deutschland (AfD) and the Liberals (FDP) back as well, the opposition will become louder than before. Others, especially from the Social Democrats (SPD) side, also argue that it needs more heated discussions with its coalition partner CDU/CSU to reach consensus in future legislations. Logically, almost everyone hopes that this will make the individual standpoints appear more in public discourses again and hence will support the desired and needed renewal of both coalition parties. Own more distinguished profiles are almost mandatory to refurbish and transform the parties. The mid-to far future will tell how both will take on this challenge and if they are able to overcome internal obstacles. A good mixture of old and new faces in ministerial positions as well as within party structures might be another first step towards regeneration.

Thus, the internal dynamics are key to look at. Annegret Kramp-Karrenbauer, the former Prime Minister of the Saarland, was recently elected to be the new secretary general of the CDU. Together with Jens Spahn, a relatively young and conservative who will lead the Ministry of Health until 2021, both are predestined to transform the party. Kramp-Karrenbauer will surely bring enough winning expertise while Spahn will try to satisfy the conservative wings of the CDU and those who voted for the populists in the last election. Both also have the potential to succeed after Merkel and run for chancellor in the next general election. Then, there is the SPD. Martin Schulz stepped down as the party leader in mid-February. Andrea Nahles, the previous minister for Labour and Social Affairs in the last government is known for her energetic speeches and will most likely be elected as party chair for the SPD at the 22nd of April. She could be the first woman in that position in party history.

Despite all internal struggles, the new government is setting first footsteps to handle external politics. The schedule could not be busier for Merkel and her new ministers. Germany seeks deeper levels of cooperation in times of growing global uncertainties with its closest partners in Europe but also with big economic giants such as China and the US. The travels of Chancellor Merkel and newly sworn in Foreign Minister Heiko Maas to Paris two weeks ago were already the first right move towards bringing forward and attempting greater European coherence in times of great mistrust and growing European nationalism. Finance minister Olaf Scholz directly travelled to Buenos Aires to meet up with other finance minister of the G20 states to discuss the future of world trade and globalisation. At the same time, economic minister Peter Altmaier headed to Washington to prevent US tariffs and duties on steel and aluminium. It all shows the issue importance to take on ever important external challenges quickly.

Thus, whether on domestic or global level, the signs are on reform and change, instead of more of the same we have gotten used to with Angela Merkel.

By Bernd Buschhausen, Partner, Instinctif Partners Germany