How Germany fell under Olaf Scholz’s coalition – in a chart

Olaf Scholz became Germany’s chancellor, pledging to modernize Europe’s largest economy and break it out of a long period of paralysis.

But two months after taking office, Russia’s full-scale invasion of Ukraine in February 2022 tore apart the Social Democrats’ plans and undermined its coalition with the Greens and liberals.

The legacy of the short-lived Scholz government is a fragmented security and defense policy and a failure to stem the country’s economic decline.

Economy

Scholz made another promise Economic miracle – citing economic growth after World War II – investing heavily in Germany’s green transition, but the economy failed to grow during his tenure. After 1.4 percent increase in GDP in 2022 decreased In the next two years and it is standing at the pre-epidemic stage.

Public finances, stretched worse by a lack of growth, have become a point of contention between the three coalition parties.

Some of the headwinds were beyond Berlin’s control, including the energy price shock and global trade shocks that followed Russia’s invasion of Ukraine.

But ING’s global head of macro, Carsten Brzezski, argued that the Scholz government had made matters worse by creating “policy uncertainty” with its constant infighting and miscommunication. International investors paid attention and moved away from the country.

Germany’s highly export-dependent manufacturing sector, which is the backbone of the economy, has been hit hard.

The push started in 2010. It is the first Trump administration in the US, which took office in 2017. German manufacturing took a nose dive in 2020-2021 due to the Covid-19 pandemic, when factories closed and global supply chains were hit hard – and it has since struggled to recover.

After years of relative stability in the labor market, unemployment began to rise again after the start of the war in Ukraine.

With demand for workers in health care, education and public administration still rising and many older workers retiring in the coming years, economists do not expect a return to unemployment levels seen at the beginning of the period.

The automotive industry’s crisis peaked last year, with Germany’s largest industrial employer, Volkswagen, planning to cut 35,000 jobs in the country by 2030 and cut domestic production capacity of more than 730,000 vehicles.

German carmakers, struggling to offer competitive electric vehicles, have lost market share in China – their most important export market – and are facing new Chinese competitors at home.

The sudden end of subsidies for electric cars in late 2023, decided by the Scholz government to tackle budget problems, has caused a loss of EV sales as the industry shifts many of its domestic factories to produce battery cars.

Germany’s long-standing housing shortage has worsened in recent years as construction activity slumped, citizens’ demand for spacious apartments and houses, and pressure from a growing number of immigrants to settle in the country.

The problem is particularly pronounced in big cities, where Scholz has failed to deliver on his promise to build 400,000 apartments a year.

Despite government efforts to legally limit rent increases in an already tightly regulated market, rents for new leases have risen sharply in a country where more than 50 percent of households rent.

One of the Scholz government’s biggest reforms was a relatively generous overhaul of benefits for the long-term unemployed, who can now claim support with few strings attached.

In the year In 2024, unemployed individuals will receive €563 per month – an increase of 12 percent compared to last year – plus “adequate” housing costs and up to €471 per child.

At a time when poverty was falling, mainstream society and conservative opponents argued that the new system created conditions that were not conducive to work.

Energy

For its energy-hungry manufacturing sector, Germany, which has long been dependent on cheap Russian gas, Russian President Vladimir Putin in 2016 After they cut supplies to most of Europe in 2022, it became a race to find alternatives.

Green Party Vice-Chancellor and Energy Minister Robert Habeck has rushed construction of hugely expensive natural gas terminals from the US and the Middle East.

Ottmar Edenhofer, director of the Potsdam Institute for Climate Impact Research, said the government had “done a great job” under great pressure.

Habek pushed through a plan to shut down the country’s three nuclear power plants by 2023, even as it forced him to open polluting coal-fired facilities.

Although Germany has avoided the blackouts that some had feared, the country is hampering its competitiveness with high costs not only for consumers but also for industry.

She also had a mixed bag when it came to the Union’s green targets, which put climate protection on its mission. Renewables now account for more than half of Germany’s electricity generation.

The country’s greenhouse gas emissions are at their lowest level since the 1950s, according to Agora Energiwende’s Tim Tank. But this was driven in part by production cuts at energy-intensive companies due to the troubled economy.

Germany continues to miss targets for reducing carbon emissions from transport and buildings. Habeck homeowners plan to ditch oil and gas heaters and replace them with heat pumps. Political destruction.

According to Edenhofer, one of the government’s achievements has been to regulate the expansion of large-scale solar power and accelerate the licensing of wind turbines.

Defense

Scholz said that Putin’s war was motivated by a turning point – Watershed period – in Germany’s security and defense policy. He pledged to arm Ukraine and announced a €100bn special fund to make the Bundeswehr fit for purpose after years of underinvestment.

But despite his bold declaration, Scholz soon angered his allies by dragging his feet on supplying Kiev with heavy artillery and tanks. The chancellor has refused to send long-range Taurus missiles to Ukraine, fearing an escalation with Moscow. Still, Germany became the second largest military aid provider to the war-torn country.

Christian Molling, director of Europe at the Bertelsmann Foundation, described Germany’s position as a “paradox”. “We are doing relatively much. But we don’t need to be champions – Ukrainians have to be champions. That’s what we haven’t achieved,” he said.

Regarding its own military preparedness, Germany

It has begun to rebuild the armed forces – a task that remains an uphill battle, said one Western defense official, pointing to excessive bureaucracy and the Bundeswehr’s constant struggle to recruit professional soldiers.

But the official cited Berlin’s commitment to buying new F-35 fighter jets and deploying a permanent brigade on NATO’s eastern flank in Lithuania as examples. “From where Germany was to where it is now – and where it is going – it’s fair to call it a change,” the official said.

Infrastructure

Germany’s transport, energy and communications infrastructure suffers from years of underinvestment, partly due to the country’s strict public deficit rules.

In the year The debt brake, a constitutional provision introduced by former Chancellor Angela Merkel in 2009, prevents state governments from taking on any new debt and the federal government from borrowing no more than 0.35 percent of GDP in any given year.

The result is an aging railroad, dilapidated highways, and crumbling bridges. Deutsche Bahn estimates €45bn needed to modernize – if possible – the trains run late.

The country was slow to adopt new technologies. as if 2023 surveyIn Germany, 82 percent of companies said they were still using fax machines. Germany has one of the lowest fiber broadband penetration rates in the OECD.

Transport Minister Volker Wissing, who left after the liberal FDP left the coalition last year. He compiled a list of 4,000 bridges In need of maintenance. It has launched a €27bn ten-year program to upgrade the rail network and plans to build 40 high-speed rail “corridors”.

However, funding for these projects is uncertain as the government dissolved before the 2025 budget was approved.

Society

Scholz’s chancellorship has been marred by street protests, plagued by lockdowns and vaccine skeptics, and farmers lashing out at fuel tax hikes.

In February last year, hundreds of thousands of the far-right Alternative for Germany (AfD) party protested their “emigration” plan, which includes mass deportations of refugees and German citizens of immigrant origin.

The outcry over the fatal knife attack of a rejected asylum seeker in the western town of Solingen has forced the government to tighten its immigration policy.

Scholz, who has opposed such a move after similar attacks in the past, has promised to speed up the return of refugees by introducing temporary border controls.

Whoever becomes Germany’s next chancellor will have to address structural weaknesses in China’s export-oriented economic model, economists say.

Germany is stuck in its longest recession since World War II, according to Timo Wollmershauser, head of forecasting at the Ifo economic think tank.

“Compared to other areas around the world, the burden of taxes, bureaucracy and energy costs on companies is high, the renewal of digital, energy and transport infrastructure is progressing slowly, and the lack of skilled workers is evident,” he said. Added.

Additional data visualization by Alan Smith