While Europe was transfixed by France’s April Fools’ come late presidential debate last week, the electoral contest that has the greatest ability to change the continent was quietly unfolding to the East, in Germany
COMMENT: Over the last four months, a populist political movement has been building around Martin Schultz, the new chairperson of the centre-left Social Democratic Party of Germany (SDP) and its candidate for Chancellor in this year’s elections. After nearly a decade as a minor party, and member of Merkel’s grand governing coalitions, the SDP under Schultz’s leadership seems finally to be in position to challenge Merkel for the chancellorship, the effects of which will be felt around the continent.
An unlikely leader who once hoped to become a professional footballer and entered politics only after his brother saved him from a fit of severe depression, Schultz is one of Europe’s and Germany’s most admired politicians. He found success in European-level politics, becoming a Member of the European Parliament (MEP) and later head of the parliament’s left-wing bloc, the Progressive Alliance of Socialists and Democrats before finally becoming President of the European Parliament in 2012. In November, he announced he would not run for a third term in the European Parliament. Returning to German politics, he was named the SDP candidate for chancellor this January before being elected SDP chairperson in what was an unprecedented display of unanimous support.
Part of Schultz’s attraction is his European Parliament pedigree. He comes with a unique marriage of political experience at the highest level, while also being clean of the messy legacy of neoliberal flirtation that has blighted the SDP’s reputation amongst leftists and the working class since Gerhard Schröder’s government of the late 90s and early 2000s.
Dubbed Agenda 2010, Schröder’s program of neoliberal reform was intended to arrest the decline of German manufacturing and persistently high unemployment. It cut benefits, access to healthcare, and employment regulation making it easier to hire and fire employees.
Reforms were painful. Not unlike the New Zealand left’s flirtation with neoliberalism, Agenda 2010 alienated the SDP’s traditional base and sent it into the political wilderness, subsumed within Merkel’s large coalition governments.
Schultz is untainted by this legacy. Early campaign speeches have seen him publicly question Agenda 2010’s necessity. A fresh face challenging this sacred cow of German politics, he has been able to draw support from across the political spectrum, even wavering supporters of the resurgent far right. Early polling after his candidacy was announced showed a 10 percent bump for the SDP and his polling for preferred chancellor has outranked Merkel’s, although being an MMP voting country, Schultz’s popularity will count for nothing if he is unable to build a working coalition.
Distancing his party from Agenda 2010 is not Schultz’s chief attraction to the European left, however. A rejuvenated SDP, free of the yoke of Merkel’s Christian Democrat-dominated coalition offers the opportunity to reframe the European response to the Euro crisis.
Merkel, though unrepentantly internationalist and pro-European, has presided over a punishingly Teutonic response to the crisis. Her support for brutal austerity has prioritised low inflation over economic recovery. In this, she is hardly alone. The German political establishment has a pathological fear of inflation. Who could blame them? Memories of the Weimar Republic’s catastrophic hyperinflation, which at one point was so bad that people wallpapered their homes with useless bank notes, run deep in Germany.
Schultz’s position is more flexible. Before leaving the European Parliament, he softened his position on Greece’s former firebrand, now supplicant Prime Minister Alexis Tsipras of the populist leftist Syriza party, acknowledging a more humanitarian route should be taken when negotiating pension cuts as part of the Greek bailout.
Many on the continent hope Shultz’s European Parliament pedigree, leftist inclination and clean slate in German politics will enable him to bring much needed reform to the Eurozone, freeing Greece from austerity and breaking the back of Euro’s seemingly endless existential crisis.
Economists and policymakers have made no secret of possible reforms. The Maastricht Treaty, which established the framework for the single currency, proscribes an overly strict maximum budget deficit of 3 percent of GDP and maximum debt to GDP ratio of 60 percent. Such budgetary rigour makes no sense when financial crises necessitate extra spending to stimulate a struggling economy.
Many acknowledge that the Maastricht deficit provisions to be ill-thought-out — a desperate appeal from France’s François Mitterrand and Italy’s Giulio Andreotti to Germany’s Helmut Kohl to build Germany deep into the European framework before the newly reunified country grew to become a continental hegemon. Merkel, however, sees Maastricht as essential and has not wavered from her conviction that austerity, rather than stimulus, is the solution to the Eurozone’s woes.
The second challenge for Schultz will be the closer harmonisation of economic policies among the Eurozone nations. Merkel has herself been pushing for this integration since 2011 — but she has not gone far enough. For countries that are now economically and monetarily tethered together for better or worse, harmonisation is essential. Here, however, she has little room to move There are still nine countries in the European Union that do not use the Euro. Most are small, Eurosceptic and fear the excessive encroachment of the EU on what remains of their national sovereignty.
Until last year, this group rallied around the UK, the largest European country that did not use the Euro. There was some security that the UK would both never adopt the Euro and would also refuse to countenance an EU that prioritised the Euro countries over the non-Euro countries.
With Brexit, this balance has shifted and the non-Euro countries now fear being sidelined by the deeper integration of the rest of the bloc. Merkel has precious little political capital to expend with these countries, having already alienated them with her refugee policy (the non-Euro countries being mainly in Eastern Europe also tend to be the most anti-refugee). Schultz, a proven Eurocrat, free of Merkel’s now toxic relationship with the Eastern European states, may have better luck.
While Germany is an apparent paragon of stability in this crumbling continent, it will never be able to extract itself from the disaster that haunts its currency. As the crisis enters its eighth year, the tedium with the Euro and with Europe is palpable. The currency has now spent most of its lifetime locked in a seemingly existential struggle. The next Chancellor will need to renegotiate Greece’s bailout terms ahead of the expiry of the current bailout in June 2018. This will almost certainly lead to a revival of calls for Grexit, a Greek exit from the Euro. In Italy, the popular and populist M5S party has called for Italy to drop the currency and Frexit has become a key feature of the French presidential race. While ostensibly stepping down from European politics, Schultz’s bid for the Chancellorship could be his opportunity to reshape the continent for generations to come.
