Weak economy, problems with long-term care insurance: this week was full of news reminiscent of 2002 and 2003. This plays into the hands of a man from the past.
For a long time it was said about Friedrich Merz that he was a man of the past – in his appearance, in his speech and in his positions a flashback to the 90s of the last century: beer mat tax reform, traditional values, dominant culture, hard edge, in short: a Yesterday’s man. Immediate for many voters in 2024 or 2025.
Well, the label of the eternally yesterday was always a bit arrogant and never did Merz justice. After all, nobody just stands still in 20 or 25 years and doesn’t learn anything. But in times when the country preferred to focus on the meaningfulness of the four-day week, with the gender asterisk and Veggie Day, the label worked quite well.
However, the longer the traffic light coalition watches, more or less without ideas, will or action, as the country’s economic power slowly but surely shrinks and dwindles, the sooner we will actually be back where we were in the late 90s and early 2000s Years were: falling tax revenues, rising unemployment figures, and ever larger holes in statutory social security.
Five lost years
The news this week was just a flashback to the beginning of the decade before last: the long-term care insurance was on the verge of bankruptcy, was one report (which is actually nonsense, but no matter), and the planned premium increase was nowhere near enough to cover that to cover expenses. A message like from 2002 or 2003. Economic output will fall slightly again this year, for the second year in a row. Could have just as easily been broadcast in 2002 or 2003. The number of unemployed is increasing and will continue to do so, predicts Andrea Nahles, head of the Federal Employment Agency. And next comes the tax estimate for the coming year, which is also likely to shrink rather than increase given the lack of growth.
Of course, we are still a long way from the misery of the 00s, when there were five million unemployed. But with the deep economic slump in 2020, the energy price shock in 2022 and two mild recession years in a row, the country’s economy is now at the level of 2019 in real prices. Five lost years, that’s bitter.
Huge expenses and lots of new debts
Not all of this is attributable to the traffic light coalition, neither the consequences of the pandemic nor all the consequences of the energy crisis and the shock from the Ukraine war. But what is serious is that the government alliance made up of the SPD, FDP and Greens has not been able to agree on much in terms of economic and financial policy since the Federal Constitutional Court blocked the path to new debt almost a year ago. Since then, the government has maneuvered its way through with all sorts of tricks and tricks; at best, ambition and courage are enough for a patchwork of 49 small details, of which it is completely unclear which of them will ever make it into the law.
One gets the impression that politics has become bogged down in the numerous challenges and crises and that it no longer finds the strength to develop new strategies and answers. It seems as if there is only black and white: tough cuts and structural reforms on the one hand or huge new spending programs and lots of new debt on the other.
Need both: supply and industrial policy
Representing the large political blocs that are currently irreconcilably opposed to each other, Capital had two prominent representatives as guests on Thursday: The economists Sebastian Dullien and Lars Feld sat on the stage of the “Wealth Building Summit” in Frankfurt. Dullien is a union-affiliated and influential economist in the SPD and the Greens, Feld is a personal advisor to Finance Minister and FDP leader Christian Lindner, but in Frankfurt attached great importance to the statement that he would also like to be associated with the Union.
Dullien and Feld discussed strategies and ways out of the current slump, which of course has both a long-term structural dimension and a very acute one, for almost an hour. The structural problems will not be fixed overnight and addressing them will take a lot of effort. The key words here are reducing bureaucracy, modernizing public administration, but also cost reductions for companies, be it in energy supply or in taxes and duties. Those were Lars Feld’s approaches.
But there is also a short-term urgency that Dullien particularly addressed: The world around us has changed, the rules are different today than they were five or ten years ago. And accordingly we have to act differently today. Dullien’s recommendations were: The causes of the acute weakness in growth can only be remedied through a courageous industrial policy with which the state stimulates private and public investments and at the same time gives companies planning security with support programs and thus supports them in transforming their business models. This will require more money than the federal government can spend today.
The intersection between Feld and Dullien: zero. The answer is obvious: we will need both to get out of the crisis – structural reforms à la Feld and more public and private investments à la Dullien. In the short term, the sad thing is that the stalemate will hardly change. There will be a chance for a new attempt after the next federal election at the earliest, i.e. in autumn 2025 at the latest. And the likely chancellor from today’s perspective is Friedrich Merz – in a grand coalition with the SPD.
Will Merz get his agenda moment?
It is quite possible that, similar to Gerhard Schröder 20 years ago after his re-election in 2002, he will have his agenda moment relatively soon after taking office – then for an Agenda 2030 or 2035. Judging by his demands on himself, that should certainly suit him. After years of standstill, he would have to design a major reform and economic program to modernize the country. about Merz’s first plans for a major tax reform – this is also a flashback to the 00s, but also an effective remedy for lethargy. However, for the SPD to agree to this, he would probably also have to accept significantly higher investments and a more active industrial policy. And, but that’s what a number of CDU prime ministers are now calling for, a reform of the debt brake in the Basic Law.
Almost three years ago, when Merz took the party leadership on his third attempt, it looked as if he was at least 15 years too late. What nobody could have guessed back then: that instead of complaining about whether Merz could really be the right candidate for 2025, the whole country would simply accommodate him. Now the time has come, at least it looks as if a Chancellor Merz could fit in quite well with the times.
Source: Stern
