German Chancellor Angela Merkel (R) and German Minister of Finance Olaf Scholz attend a cabinet meeting at the German chancellery on August 19, 2020 in Berlin, Germany.
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A coalition deal has been announced in Germany after almost two months of talks following the country’s inconclusive federal election in September.
Olaf Scholz, the center-left Social Democratic Party’s candidate, will be Germany’s next chancellor, replacing Angela Merkel who has led Germany for 16 years.
The agreement between the SPD, the Greens and the Free Democratic Party, will see them govern together in a three-way coalition for the first time. The alliance has been described as a “traffic light” coalition in reference to the parties’ traditional colors.
Christian Lindner, the head of the pro-business FDP, is set to be the next finance minister, according to the deal which was announced Wednesday afternoon and will now be voted on by the different parties. The Green Party’s co-leaders, Annalena Baerbock and Robert Habeck, are poised to take on the roles of foreign minister and economy and climate minister, respectively.
“The first traffic light [in Germany] was erected in Berlin in 1924 in Potsdamer Platz. At that time, it was still an unusual technology. ‘Can it work?’ people asked skeptically,” Scholz told a press conference in Berlin on Wednesday, according to a Reuters translation.
“Today, the traffic light is indispensable when it comes to regulating things clearly and providing the right orientation and ensuring that everyone moves forward safely and smoothly. My ambition as chancellor is that this traffic light alliance will play a similarly groundbreaking role for Germany,” he added.
Debt brake remains
The draft coalition agreement covers a wide range of climate policies — including plans to adopt a climate protection program by the end of 2022, utilize all suitable roofs for solar energy and the intention to align an expansion of its power network with a new renewables target.
Germany will try to dedicate 2% of its land surface to wind power infrastructure and will continue to exclude nuclear power from its energy mix, a policy that deviates from the policy of its neighbor France. The agreement also stated that Germany would stop funding renewable energy once its coal exit was achieved.
It said immigrants shall be eligible to apply for German citizenship after five years in the country and Scholz confirmed Wednesday that Germany will keep its constitutional debt brake — this basically forces leaders to present budgets without structural deficits or a very limited deficit.
The new coalition said it would launch a parliamentary investigation into the Afghanistan evacuation operation. The country will remain part of NATO’s nuclear-sharing agreement under the new government, the deal noted, and the Greens will have the right to nominate the country’s European commissioner if the EU Commission’s president is not from Germany, as is currently the case with Ursula von der Leyen.
‘Traffic light’ coalition
The parties have vowed to modernize Germany, which is Europe’s largest economy, with a priority placed on the transformation into a greener, more digitalized economy, as well as infrastructure investment.
German businesses are anxious to see what this transformation means for them in reality, in terms of energy prices and business costs.
Outgoing leader Angela Merkel’s conservative alliance, the Christian Democratic Union and Christian Social Union, will now see itself go into opposition.
Holger Schmieding, chief economist at Berenberg Bank, described the alliance as a “continuity coalition.”
“New faces need not mean a major change in policies. We expect the new government to continue the gradual tilt towards more government spending on pensions and investment as well as a green transformation that has been the hallmark of the last eight years of Merkel’s 16-year reign as chancellor,” he said in a note Wednesday.
Like Merkel’s “grand” coalition of center-right CDU-CSU and center-left SPD, the new government includes parties from both sides of the political divide, he noted.
“In terms of numbers, the centre-left (SPD and Greens) is much stronger and the centre-right (FDP instead of CDU/CSU) much weaker in the new government than before. But on many issues, notably domestic and European fiscal policies, the FDP often advocated a harder line than Merkel did. As a result, we always expected the compromises struck between the new coalition partners to be quite similar to what a continuation of the old government would have delivered.”
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