Spiegel: The German Conservatives' Faustian Pact With the Far-Right

What happened in Thuringia this week -- where a center-right politician was elected governor with the help of the far-right populist Alternative for Germany (AfD) party -- was a milestone for the AfD. It was the first time the party, which has been criticized for being extremist and at times openly anti-Semitic, has helped to elect the leader of a state government. [...]

What remains is the embarrassment for mainstream conservatives, especially for CDU and FDP leaders in Berlin, who didn't intervene soon enough. What remains is the fact that conservatives in Thuringia allowed themselves to be seduced by the AfD. What remains is a triumph for Björn Höcke, the right-wing extremist state leader of the AfD in Thuringia, who made those on the center-right look like fools. What remains is the damage caused to liberal democracy. [...]

In their book, "How Democracies Die," Harvard political scientists Steven Levitsky and Daniel Ziblatt began with the chapter, "Fateful Alliances." This is how it usually begins, they write: Representatives of the current system ally themselves with its enemies in order to maintain their grip on power. That's how it was in the Weimar Republic, where Hitler wouldn't have stood a chance without an invitation from conservatives. According to Levitsky's and Ziblatt's analysis, this has also been the case in Brazil, Peru and Venezuela.

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The Irish Times: Germany has suffered a political earthquake. What happened?

He accepted, as the price for power, votes from the AfD. It began life as a euro bailout protest party but has over time radicalised into a hard-right party with an increasingly influential far-right wing. Thuringia’s AfD, and its head Björn Höcke, is head of this far-right wing. He calls himself a “social patriot” while critics accuse him of flirting with Holocaust denial and relativising Nazi crimes. As minister president, critics warn, Kemmerich will be dependent on this extremist support to govern.[...]

Because the Thuringian tremor could crack the federal government. Until now a gentleman’s agreement existed among all other parties not to co-operate with, or allow support from, the AfD. Chancellor Merkel described Wednesday’s vote as “unforgivable” and has demanded the parliamentary decision be revoked. Her successor as CDU leader, Annegret Kramp-Karrenbauer, has attacked her party colleagues in Thuringia for breaking their own internal party agreement to boycott the AfD. [...]

With quiet triumph. After just seven years in business, it now sits in all of Germany’s 16 state parliaments and is the largest opposition party in the federal chamber, the Bundestag. In Thuringia it is the second-largest grouping. While the local CDU and FDP fear a snap election, the wrath of other parties and of local voters, the AfD can sit back and watch the drama unfold.

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Deutsche Welle: German parliament rows over UN Migration Compact

"Millions of people from crisis-stricken regions around the world are being encouraged to get on the road," said AfD leader Alexander Gauland. "Leftist dreamers and globalist elites want to secretly turn our country from a nation state into a settlement area."

Though the motion was swiftly rejected once the debate was over, the AfD considered it a victory to get it on the agenda at all, since the German government is under no obligation to ask for the parliament's approval to ratify the non-legally binding compact. [...]

"It should have been the task of the government long ago to explain the migration compact factually and publicly. You were silent for too long, and that allowed these conspiracy theories to start in the first place," said Stamp, a member of the opposition Free Democratic Party (FDP).

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Bloomberg: Six Lessons From Merkel’s Impasse and What They Mean for Germany

Merkel has kept her hold on power for 12 years by occupying the political middle ground, sticking to pro-European policies and finding partners to govern with who broadly shared that outlook. But the days of steady, stable coalition-building in Germany are over, hastened by the refugee crisis of 2015-16 that upended the political landscape. A fragmented parliament, acrimonious partisan standoffs and factional fighting over migration within Merkel’s bloc make Berlin look more like Rome or Washington these days. With the Social Democrats still wavering and the pro-market Free Democratic Party having pulled out of previous coalition talks, only Merkel’s bloc is showing it wants to govern. Yet its worst election result since 1949 makes her more dependent than ever on a coalition partner to govern with a reliable majority in parliament. It’s a paradox with no obvious solution, neither for Merkel nor any other political leader. [...]

Polls suggest Merkel remains popular with the public and has strong backing among party leaders, with no obvious successor in sight. She has a record of humbling and outlasting enemies, including in her own party. Lindner may be the latest victim. Since he walked out of coalition talks in acrimony, support for the Free Democrats has fallen to as little as 8 percent, compared with 10.7 percent in the federal election, while his own approval ratings nose-dived. It’s a warning to other would-be challengers as his gamble looks to have failed. [...]

Merkel, 63, dodged a bullet on Sunday when the Social Democrats voted to pursue talks on governing with her Christian Democratic Union-led bloc. While it isn’t the final step, just getting there underscores her perseverance and determination. If she gets a coalition deal with the SPD, her stamina, command of policy details and “step by step” mantra -- ridiculed as a lack of vision by critics -- will have carried the day again. She remains the head of Europe’s biggest economy, the most experienced leader of the G-7 nations, and a formidable negotiator. Whether her domestic opponents get the better of her now, as they must surely do one day, it would be a foolish adversary who wrote her off just yet.

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Politico: Dutch prime minister says more EU integration ‘not the answer’

The Dutch prime minister — who was speaking at the annual congress of the Alliance of Liberals and Democrats for Europe (ALDE) — did not name Macron in the speech but at one point indicated his skepticism for the idea of “democratic conventions” that was “coming from France.”

Taken together, the speech is a strong rebuff to Macron’s ambitious and detailed reform agenda, which includes a wide range of policies from introducing a new class of transnational MEPs to the creation of a common budget for the Eurozone. [...]

Rutte, who is a liberal like Macron, added that pushing for more European integration cannot be a goal in itself. “Integration for integration’s sake will only harm public support for the European Union. So before we develop new policy, before we set up new agencies, before we think up new rules and regulations, we need to ask ourselves: what problem does this truly solve?” [...]

Rutte also took a sideswipe at the EU’s conservative European People’s Party. He said he didn’t understand why the party of Hungarian prime minister Viktor Orbán was still a member of the mainstream political grouping despite his populist policies. “Why is he still a member of the EPP?,” Rutte asked, adding that it was strange that Orban participated in pre-summit meetings with his EPP colleagues.

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Al Jazeera: Imagining a post-Merkel Europe

Then there is the added Merkel factor: During Merkel's 12 year-reign, not a single coalition partner has emerged strengthened out of a coalition with the chancellor. So, small wonder that the pro-business Free Democratic Party (FDP) and the SPD are both traumatised by dramatic electoral defeats following an alliance with Merkel, and are very hesitant to enter another coalition with her. [...]

The bigger danger is that the compromises necessary to form governing coalitions, in a more fragmented party system, will not lead to the necessary reforms that Germany needs to undertake, in the face of the digital transformation of its industrial base, competition from the US and China, as well as the demographic strain on its social systems. [...]

To be sure, Merkel's experience and stature as a crisis manager would be a big loss. During the Ukraine crisis, her political standing and her ability to bridge the divide between anti-Putin and more accommodating forces within the EU were key to managing the situation. This allowed Europe to play a crucial role in the crisis. [...]

The biggest foreign policy mistake a new German government could make would be to close the door on Macron's proposals for reforming the eurozone and the EU. In Germany, the only two parties clearly positioned against Macron's eurozone proposals are the right-wing Alternative for Germany (AfD) and the FDP.

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Politico: In defense of Christian Lindner

In the current political climate, a government bringing together such different animals as traditional conservatives, left-leaning environmentalists and free-market liberals was never going to be a safe bet. The parties clashed on taxation, agricultural policy, climate change and pretty much everything else. Migration turned out to be the most contentious issue, with the CSU and the Greens at odds over the issue of family reunifications of refugees. (Lindner’s FDP sided with the Bavarian conservatives on that one.) [...]

It was first and foremost in Angela Merkel’s interest to overcome obstacles and make the thing fly. The German chancellor has become the reigning world champion in running coalition governments. She excelled at bringing about the kind of hard-won compromises struck in late night meetings that power-sharing requires — and flourished at the expense of her coalition partners. Running a supremely complex government called Jamaica would have been Merkel’s magnum opus, a crowning achievement.

The other players, on the other hand, had less to gain. They wanted the power and the glory and the ministries, of course. But the political differences on key issues were such that each party had to bend over backwards to compromise. A Jamaica coalition, no matter what, would have been a tough sell to the most loyal voters. [...]

Lindner’s decision to pull out, on the other hand, suggests that the self-correcting mechanisms of democracy are kicking in. True, a fair amount of political stability — prioritized by Merkel in recent years — is essential to a functioning system. But in times of change, democracy also needs debate and dissent. Today’s Germany is nothing like the Weimar Republic; following years of political and economic stability, the country can cope with a little uncertainty.  

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Social Europe: Jamaica And The Eurozone (26 October 2017)

The source of this disturbance is the Free Democratic Party (FDP) which is prepared to follow a radicalized Schäuble strategy.  The FDP manifesto is clear: in order to avoid permanent wrong incentives, ‘we want to continuously reduce the lending capacity of the ESM (European Stability Mechanism) until it comes to a long—term end‘. Of course, this statement is not meant as a serious economic policy statement that aims to improve the eurozone’s institutional setup. First, , it is an expression of an ideological fixation which plays with a deep-seated narrative in German politics. In this sense such a policy proposal is not unique to the FDP but can be found in many segments of German political opinion: it is the German taxpayer who paid for the fiscal profligacy of the eurozone’s southern periphery, and this must come to an end. And it is the Free Democrats who see it as their task to do just that. [...]

Of course, Schäuble, the politic pro that he is, did not lose any time in securing backing for his tough line by leaking the ‘non-paper’ ‚Paving the Way to a Stability Union’ of his experts in the Finance Ministry which reflects the FDP program 1:1. Chances are that this may soon become official German policy. When it comes to the eurozone, the difference with the proposals of the AfD is extremely slight. And so is the difference to the current policy stance of CDU/CSU, both of which are very much in favor of stamping German interests on the eurozone’s architecture. Programmatically, the Greens have different views on eurozone reforms but for them getting into power may override all else. In the past, the Green Party did not try to differ from the mainstream pack when it came to crisis management in the eurozone. Seen in this light, the FDP is only spelling out what a majority of parliamentarians thinks and what three of the four Jamaica parties favor. [...]

The question, though, is why the block of CDU/CSU/FDP takes such a harsh stance? The best answer is given by Schäuble in his long interview with the Financial Times where he again and again stated that the rules-oriented austerity policy was a huge success. And indeed, this view is deeply entrenched in German public discourse, and even more so in Germany’s economic branch. In the US, the recession lasted about a year and a half – from December 2007 to June 2009.  By way of contrast, the eurozone recession started technically in January 2008, ending April 2009 only to turn into a long recession from Q3 2011 until Q3 2013. The eurozone thereby on average lost substantial amounts of income in comparison to the US, largely because of different fiscal policy stances. Moreover, without the intervention of Draghi and the policy change of the ECB (QE), the outcome would have even been worse. The attempt to declare the crisis strategy of Schäuble & Co a success story has no empirical base whatever German public discourse asserts.

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Social Europe: Schäuble’s Poisoned Parting Gift To The Eurozone

At his last Eurogroup meeting the departing German finance minister left a chilling message of his own in the form of a short non-paper on European economic policy. I will go through point by point, but the spoiler is simple: it represents a doubling down of believers in Maastricht and a complete rejection of all the risk-sharing and stability-promoting ideas tabled by the European authorities and, most vividly, by French President Macron.

The non-paper enunciates three basic principles: fiscal responsibilities and control must be kept together (aka avoid moral hazard); Member states need to be forced more effectively to implement structural reforms; and credible stabilization functions are needed to deal with global or domestic shocks. There is not so much wrong with the principles themselves; it is the ends to which they are put and the way they are operationalised. [...]

First, in a very real sense it effectively abandons elements of monetary union altogether and brings back characteristics of the previous European Monetary System (EMS). Even in relatively stable times countries perceived as weak would pay an interest premium over “hard-currency” countries, just as they did in the EMS; it would just reflect the probability of default rather than depreciation. This would, by itself, tend to perpetuate and even exacerbate income differentials within the monetary union. A key incentive for former “soft currency” countries to sign up to the Euro would be removed. (It is true that the substantial lowering of interest rate differentials on joining monetary union, created some problems for periphery countries, but the answer would have been tighter fiscal policy and/or macroprudential policies). German economists tend to emphasise incentive compatibility: but they have failed to consider (or maybe simply do not care about) the incentives of the majority of Euro Area members, who would be effectively tied into a system that, for them, combines the disadvantages of the EMS and the EMU. [...]

To sum up the above analysis, Wolfgang Schäuble’s parting gift to the Euro Area is a recommendation, first, to destabilize the Euro Area through measures (sovereign debt restructuring) designed to remove moral hazard, second to reject the most prominent various measures on the table in the direction of a deepening of economic policy integration and, third, instead to rely on “structural reforms”, a deepening of the Single market including a true banking and capital union to bolster resilience. There is nothing on the table here to encourage crisis-hit countries to see their future and economic advantage firmly in continued Euro Area membership. And nothing to indicate to the European institutions – who have jointly signed up to the idea of deepening EMU – and the new French President that Germany is willing to jump over its own shadow,m despite some warm words from the Chancellory in recent weeks.

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Politico: Hail Schäuble!

Investors are also cheering Schäuble’s exit. (He’ll now preside over Germany’s Bundestag.) They hope that whoever replaces him will be more willing to spend the country’s large surplus, to the benefit of all eurozone members. Yet if anything, Schäuble’s departure introduces substantial risks. [...]

Despite his reputation, Schäuble is staunchly pro-European. The Liberal Free Democrats (FDP) — now most likely to claim the finance ministry given the recent election result — support more pan-European security and defense cooperation. But under its new leader, Christian Lindner, the party has veered sharply to the right on issues related to the eurozone, performing well with parts of the electorate as a result. [...]

Schäuble knew how to manage his troops and keep them in line, even as his government supported three bailouts for Greece and one each for Spain, Ireland and Cyprus. He was also able to keep an even keel when European Central Bank President Mario Draghi turned his institution into a fiscal backstop with his commitment “to do whatever it takes” to keep the eurozone intact in 2012. This went well beyond what most Germans believe the bank’s mandate should be.

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Jacobin Magazine: Germany Is Not an Island

The other big story, and the precondition for the AfD’s surge, is the ongoing erosion of the political center. Germany has yet to witness a spectacular implosion of the center-left like in France or Greece, but the Social Democratic Party (SPD) ended the night with 20.5 percent, its worst postwar result and a humiliating defeat for its renewal candidate Martin Schulz. [...]

Though the German elections may seem relatively “normal” by contemporary European standards, a second peculiar fact stands out in the exit poll data: 84 percent of eligible voters described Germany’s economic situation as “good” — the highest number in decades. This makes sense given the country’s moderate but sustained economic growth and declining unemployment, particularly in light of conditions elsewhere in Europe. Although wages have stagnated for decades and job growth is concentrated primarily in precarious, low-wage employment, in the eyes of most German voters their country and economy now appear as an island of relative stability, making it understandable why many would be willing to “act satisfied and shut up,” as Oliver Nachtwey put it. [...]

This should come as little surprise, as the AfD stitches together a coalition between deeply conservative, former CDU voters repelled by Merkel’s shift towards the center on many social issues, and dissatisfied working-class and unemployed voters, where economic and social anxieties intermingle with racist and chauvinistic sentiments in a jumbled assortment of anti-establishment posturing. These constituencies, and other segments of the population who voted for the AfD, are united at the ballot box under a xenophobic, protectionist banner, despite the fact that the AfD’s economic program would be disastrous for many of its lower-income supporters if ever implemented. [...]

All qualifications aside, the AfD’s rise represents a true watershed in postwar German politics and a warning of what the future could bring. Germany is not an island surrounded by a crisis-prone Europe, but rather part and parcel of this crisis. Its centrifugal nature may have insulated the country from its most devastating economic effects and dramatic political shifts thus far, but as last Sunday demonstrated, nowhere in Europe is immune to the threat of right-populism today. Should present trends continue, a radical right-wing force will stabilize and consolidate itself as a permanent presence in German politics — whether in the form of the AfD or another, potentially more radical formation after it.

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Al Jazeera: Emmanuel Macron wants reforms for post-Brexit EU

Macron used the speech at Sorbonne University in Paris on Tuesday to argue the case for institutional changes, initiatives to promote the EU, and new ventures in the technology, defence and energy sectors. [...]

Macron's proposals for a post-Brexit shake-up include a Europe-wide "rapid reaction force" to work with national armies, and plans to give the 19-member eurozone a finance minister, budget and parliament.

He also called for a new tax on technology giants such as Facebook and Apple - accused of paying too little corporate tax on their businesses in Europe - and an EU-wide asylum agency to deal with the refugee crisis.

He even raised the prospect of major changes to the Common Agricultural Policy, the EU's giant farm subsidy programme, which has historically been defended by France and its powerful agricultural lobbies. [...]

Following Tuesday's speech, Juncker, head of the European Commission, the EU's executive arm, praised Macron, saying the bloc required "courage" to move ahead.

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Politico: 5 fronts in the coming eurozone battle

The possibility of the German liberal party FDP entering into a governing coalition with Chancellor Angela Merkel means Macron’s plans to overhaul the eurozone have suffered a serious setback. The FDP has made it clear throughout the campaign that it would draw a “red line” in front of any plans to further integrate the eurozone, as France advocates. [...]

As always, Macron’s speech will be loaded with symbolism. It will take place at the Sorbonne, Paris’ oldest university and once the center of France’s intellectual life, in front of European students. The choice of the date was more controversial: The French president went against the advice of some in his entourage, who cautioned that this overt attempt to set part of the German political agenda might backfire if he falls way short of his ambitious goals.

The new French leader notably wants Europe’s economic and monetary union to have some form of common budget under the authority of a so-called eurozone finance minister. Although Merkel and even her hard-line Finance Minister Wolfgang Schäuble have greeted Macron’s general ideas with the appearance of polite interest, many German officials and parties oppose “fiscal transfers,” or the pooling of budgetary resources, even in a limited way.

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Politico: For EU reforms, watch Germany, not France

The generally accepted thesis is that everything depends on Macron. The French president will need to overhaul France’s labor markets and improve its fiscal situation as a pre-condition for any Franco-German cooperation over eurozone reforms. But this is only half true. More important for the fate of the eurozone will be Merkel’s choice of coalition partner — and the party that assumes control of the finance ministry. [...]

In practice, only three reforms are really in play: first, the amount of fiscal space countries have to exploit before bumping into EU-wide fiscal ceilings; second, the completion of the eurozone’s banking union, especially in the area of a pan-European deposit insurance; and third, repurposing the eurozone’s bailout fund, the European Stability Mechanism, to give it a bigger mandate and potentially more powers. [...]

To say that the ball is firmly on the French side of the court would be to misread the situation. Merkel, who is facing an election in September, will have her own constraints. Opinion polls predict that she will secure a fourth consecutive term as chancellor, but with her center-right Christian Democrats polling at 38 percent, she will need a coalition partner.

Merkel’s Bavarian beer tent speech, in which she warned that Europe could no longer rely on the U.S., and the CDU’s “stronger Europe for a stronger Germany” slogan, both seek to create a bigger mandate for Merkel, for “more Europe.” Just how much more, however, will depend in large part on her partners in the government.

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