© REUTERS/Fabrizio Bensch

Try to picture what Angela Merkel would be like as a man, slightly younger and of West German origin. But just as solid, rational, and pragmatic as the woman who has governed Germany for the last 15 years. Unimaginative, yet endowed with a wicked sense of irony (mostly kept private). Combining political flexibility with a lot of experience and a deft hand at power play.

You are bound to end up with Olaf Scholz, 62, current vice-chancellor and finance minister. In terms of character and politics, he is Merkel’s twin—and so far, also her most important ally in the cabinet. And if it was up him—and now his party, too—Scholz would become her successor as well.

In a surprise coup, Germany’s Social Democrats on August 10 nominated Scholz as their candidate for the chancellery in the 2021 elections. The surprise was in the timing, a very long 13 months away from the likely polling day, and in the unanimity of the decision. But not in the choice itself: in a party that has used up leaders at a crazy rate, Scholz is the last popular, well-known figure (read our 2018 profile of him here.)

He owes this popularity in equal parts to his own talent, his excellent working relationship with Merkel, and the appeal of his sober pragmatism during the coronavirus crisis. Yet as a nominee, he will now be exposed to much closer and more unforgiving attention.

In the Spotlight

The Wirecard scandal—a huge case of fraud in a now-bankrupt German payments system company that should have been uncovered and stopped by financial regulators reporting to the finance minister years earlier—may provide a first taste of the changed atmosphere. Politicians from every other party will now try to lay the blame at Scholz’s door.

Even apart from Wirecard, Scholz will have to perform a multiple balancing act until the 2021 elections. It begins with his own party, a divided and self-destructive organization, where Scholz is respected but not liked. Just nine months ago, Germany’s Social Democrats (SPD) passed him over for the party leadership and chose two relatively unknown politicians from the left wing instead.

In any case, the SPD has been moving much further left as its election results have deteriorated–yet Scholz appeals to voters precisely because he is a moderate. As a candidate, he will need to motivate his party to campaign for him while reassuring centrist voters that they need not fear drastic changes. That may not be easy: the SPD’s most plausible claim to the chancellery means entering a coalition with not only the Greens, but the socialist Left Party.

New Rifts

In the meantime, Scholz will be facing new rifts within the grand coalition with Merkel. Earlier this year, Scholz could rely on the Christian Democrats (CDU/CSU) to support the enormous spending programs he designed to help the German economy survive the COVID-19 crisis. But what happens if the pandemic continues and the slump gets deeper? Merkel’s conservatives will hesitate to endorse further deficit spending for ideological reasons. But they also won’t want to hand Scholz another victory.

The same is true at the European level, only more so. Scholz is a European integrationist. Even before coronavirus, he broke with some of the taboos set by his predecessor in the finance ministry, Wolfgang Schäuble, by backing, for instance, a European deposit insurance scheme. When the pandemic set in, Scholz worked closely with his French counterpart to push for more generous European support to those member states that were hit hardest by the virus.

As candidate for the chancellery, Scholz said that a European Union based on more solidarity was going to be one of his main concerns. Such a stance is bound to lead to conflict within the current coalition. Merkel did put her considerable political weight behind financial support for weaker EU countries this summer. But many in her party quietly disagreed.

Tensions over Europe

Such tensions are certain to rise to the surface now as the race to succeed Merkel heats up within the conservative bloc. It is lucky for Europe that the EU budget deal was finalized in the early weeks of the German EU presidency; during the remaining four months, the emerging domestic differences are going to be much more of a hindrance.

Just before Scholz’s nomination, the SPD stood at 15 percent in the polls, behind Merkel’s conservatives (38 percent) but also the Greens (18 percent). Scholz does not lack self-confidence; he believes that a good candidate can add 10 percent to the score. But even then, and even if SPD remains united behind Scholz, the math remains uncertain.

Much depends on the future course of the pandemic. Politically, the COVID-19 crisis has boosted both Merkel’s and Scholz’s approval ratings. When Merkel leaves office next year, will German voters turn to her closest political look-alike? It’s possible. But so is the reverse. A German public that is fed up with the pandemic and its effects on everybody’s life may want to opt for change.

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© REUTERS/Andreas Gebert

A small biotech company in the German city of Tübingen is one of about 20 companies, institutes, and universities worldwide working on developing a vaccine against COVID-19, the new coronavirus that is causing a worldwide shutdown.

With a staff of 450, CureVac AG is pushing ahead with an innovative, RNA-based method that, if proven successful in the clinical trials planned for this summer, would make it possible to vaccinate hundreds of millions of people within just a few weeks.

Yet on March 15, the German newspaper Welt am Sonntag reported that US President Donald Trump was trying to buy up the company or hire away its scientists so that the United States—and only the United States—would benefit from the vaccine.

From a journalist’s point of view, it’s a good story. For the German government, however, the story is even better: at a time of terrible worries and fears, the CureVac drama provides a perfect narrative of hope, of good against evil, and of solidarity against selfishness. It’s crisis communication at its finest.

Being such a good story doesn’t make it untrue, either, despite energetic denials by Richard Grenell, Trump’s ambassador to Berlin. The German government confirmed the report; CureVac itself issued a half-hearted statement which only denied that an offer for the company as a whole had been made. No mention was made of trying to lure away the scientists working there.

Add to that a curious coincidence: CureVac had come to Trumps’s attention at a White House meeting on March 2, where a number of biotech CEOs outlined their efforts against the coronavirus. One of them was Daniel Menichella, the German company’s CEO, a Harvard-educated American business manager.

Just days later, Menichella was replaced unexpectedly. The shareholders brought back his predecessor Ingmar Hoerr, a co-founder of CureVac. Hoerr is not in good health, so his deputy Franz-Werner Haas will be running the company day-to-day for the time being.

Trump’s attempt to poach the vaccine research outraged German politicians of all parties. The Federal Ministry for Education and Research pointed to the substantial financial support that CureVac had been receiving for its research. The European Commission chipped in with offers of additional credits of up to €80 million.

“Germany is Not for Sale”

Economic Minister Peter Altmaier even raised the idea that Germany could block a foreign takeover because German security interests were at stake. Except that this time, it would be to protect a German company not from China, but from the United States. “Germany is not for sale,” Altmaier added somewhat unnecessarily. Chancellor Angela Merkel said the federal government had gotten involved at a very early stage. The issue had been “solved,” she said.

At a time when all the news seems dark—from the number of infections to the economic fall-out of the crisis—the CureVac story hits a number of spots.

It caters to rising anti-American feelings fueled by anger over President Trump’s policies and attitude and especially over his decision to abruptly close US borders to Europeans without consulting with allied European governments. It also deflects criticism away from Germany’s public authorities, which have not always been up to scratch over fighting the pandemic, either.

The story contains an element of “David against Goliath”—after all, it’s about a small German company facing down demands from the giant United States. In parallel (and perhaps in contradiction, but who wants to squabble?), it’s a battle between billionaires.

CureVac’s main shareholder is Dietmar Hopp, founder of the German software giant SAP and certainly a much richer man than Trump. Hopp immediately promised to keep the company and its jobs in Germany and to make any vaccine available to people all over world. Incidentally, the second-largest investor is the Melinda and Bill Gates Foundation—and Gates will certainly not accept that any vaccine be limited to the US public.

Yet the most potent ingredients in this remarkable story are pride and hope: the pride about having a German company on the cutting edge of the world’s most important research; and the hope that a vaccine available to everybody in the foreseeable future. While it is clear that the process is still likely to take several more months, CureVac and its commitment to Germany and the world still bring a silver lining to the Corona story.

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© REUTERS/Fabrizio Bensch

On March 21, 1933, the city of Potsdam was decked out in black-white-red, the colors of the German empire that had ended 15 years earlier. Hundreds of thousands of spectators were lining the street. The “Day of Potsdam” was an important moment for Adolf Hitler’s consolidation of power: a demonstration of bonding between the still powerful German aristocracy and the new Nazi regime.

Prince Wilhelm of Prussia, the eldest son of the exiled emperor Wilhelm II, who had abdicated in November 1918, was given the place of honor in Potsdam’s Garrison Church: with his family, the Hohenzollern, he sat behind an empty chair symbolizing the Kaiser’s absence. Hitler, when entering the church, saluted him.

Both men knew and intended to make use of each other: Wilhelm to try and restore the monarchy, Hitler, to pacify the old elites and consolidate his grip on power. Hitler won: Wilhelm’s family, the Hohenzollern, never returned to power.

But how much did the prince actually help the Nazis? That’s no longer just a question for historians. The answer is worth millions of euros in restitution claims—claims that today’s Hohenzollern are making against the federal government as well as the states of Berlin and Brandenburg. Years of secret negotiations have not yielded a settlement. In March, the state government of Brandenburg will decide whether to have the courts rule on the matter.

Compensation Demands

The Hohenzollern are demanding compensation for land expropriated by the Soviets in East Germany in 1946 as well as the return of thousands of artefacts—paintings, pieces of furniture or jewelry, books and other items such as valuable snuff boxes which their ancestors had acquired over the centuries.

At an earlier stage, the family even demanded the right to a free residence in Schloss Cecilienhof in Potsdam, a former Hohenzollern residence that in the summer of 1945 housed the Potsdam Conference. It was there that Truman, Stalin, and Attlee divided up the vanquished Germany.

East Germany, under Stalin’s control, became communist. In 1946, the Soviet occupational forces expropriated large landowners in the region, among them the Hohenzollern. But after German unification in 1990, the law was reversed: moveable property was given back; for land, there was to be compensation. However, the new pan-German government made one major exception: former owners who had “substantially abetted National Socialism” were excluded from making any claims.

There is little doubt that Crown Prince Wilhelm was a Nazi sympathizer who wrote Hitler fawning letters. Yet no court has ever explored the meaning of “substantially abetting.” How far is it a question of intention?  How much evidence is needed to show that the support actually helped Hitler?

Given the legal uncertainties, the Hohenzollern family from 2014 to 2019 secretly negotiated with Germany’s federal government as well as the states of Berlin and Brandenburg for restitution or compensation of their former East German property.

Yet little progress was made until 2019, when the talks were leaked to the public. Then, outrage over the Hohenzollern’s claim to so many artifacts of great historic and cultural importance—currently displayed in nearly 40 museums in and around Berlin—ran high.

“We’re not living in a monarchy anymore,” exclaimed Wolfgang Thierse, former president of the Bundestag. The Greens and the Left Party in the Bundestag called for a hearing on the issue to try and stop a secret deal with the emperor’s heirs.

An Empty Boast?

At the end of January, the committee for cultural affairs invited several lawyers and historians. Yet the hearing was inconclusive: the lawyers were unwilling to commit themselves; the historians invited to the event were divided; and as opposition parties, both the Greens and the Left were powerless to force the issue.

Most German historians actually believe that Wilhelm’s support contributed to Hitler’s rise. But the Hohenzollern family, keen to clear its reputation and regain its property, commissioned its own expert opinions. The well-known Australian historian Christopher Clark, for instance, largely exonerated Wilhelm in a study written in 2011.

Clark later somewhat revised that position. The prince, he now says, was a rightwing extremist and Nazi sympathizer. But Wilhelm was such a twit that nobody took him seriously. His boast of having procured two million votes for Hitler was just that—an empty boast. By that logic, Wilhelm failed to substantially advance the Nazi regime: not for lack of will, but for lack of weight.

Today, the Hohenzollern family is torn between wanting to regain their former property and avoiding further damage to their reputation. That includes not running the risk of having a judge confirm that Wilhelm helped Hitler to power. “I continue to be open to a comprehensive amicable settlement,” Georg Friedrich Prinz von Preussen, the current head of the family, declared in a press release in late January.

Little Public Sympathy

Germany’s public authorities face just as much uncertainty over the legal outcome. In the worst case, Germany’s state museums could lose thousands of historically important Hohenzollern items. And not just from the family’s East German properties: the Hohenzollern have also loaned numerous pieces from their undisputed West German holdings to public collections. If the quarrel escalates, they could take them back.

“When it comes to the issue of the Hohenzollern, I’m interested in sustainable solutions in the interest of the state and not in big headlines,” Brandenburg’s Finance Minister Katrin Lange told reporters in late January.

Yet going back to the negotiating table will not be easy. After the Bundestag hearing and the newspaper headlines, any settlement seen as overly generous to the Hohenzollern will meet with massive public criticism. More than a century after the revolution which established the Weimar Republic, very little sympathy for the former imperial family remains.

The latest snippet of news concerning the Hohenzollern doesn’t help, either. It was just announced that the Hohenzollern crypt in the Berlin Cathedral would be closed off for renovations until 2023. It houses the remains of 84 members of the family, among them the Great Elector Frederick William of Brandenburg.

Yet today’s Hohenzollern will not be contributing a single cent to the 17.4 million euro that the renovations will cost. “That greedy, miserly dynasty,” commented Neues Deutschland, a leftist daily newspaper.

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© REUTERS/Hannibal Hanschke

Here are three takeaways from the earthquake in German politics:

First, the next leader of Germany’s conservatives will be a man—and politically quite different from Chancellor Angela Merkel and her preferred successor Annegret Kramp-Karrenbauer, who announced her resignation on Monday. Personally speaking, my money is on Jens Spahn, the current health minister, over the former CDU grandee Friedrich Merz and North Rhine-Westphalia State Premier Armin Laschet.

Second, the Christian Democrats’ new leader will face Herculean task. He will need to reconcile the different political wings and bridge the deep divide between East and West within the party. He also must find an effective way of countering the rise of the extreme-right Alternative für Deutschland (AfD). Otherwise, Merkel’s CDU risks marginalization.

Third, please look at who has, at least for now, survived once again: Angela Merkel and her grand coalition. Both have weathered hard storms. Merkel is still looking cool and unruffled while her SPD coalition partners appear increasingly frazzled, but don’t count either out. Both the chancellor and her government could last until the end of their regular term in the fall of 2021.

Stability and Turmoil

Germany is a strange mixture of stability and turmoil these days. Despite numerous coalition crises, Merkel is well into her 15^th year in office at home and well respected, even admired abroad. A safe pair of hands if ever there was one, she is a safe haven from the rapid, profound changes that have upturned politics in most Western countries.

Germans largely share this view. Angela Merkel continues to be the country’s most popular politician—a truly astonishing feat after such a long time in office. At the same time, a quick survey showed, most Germans do not want her to change her mind about leaving the Chancellery and run for a fifth term in office. Even though they are risk averse, they are conscious of how stagnant the country has become under Merkel.

In late 2018, when she gave up the party leadership, Merkel also promised not to run for chancellor again. With her blessing, the CDU elected Annegret Kramp-Karrenbauer, a centrist from the western state of Saarland, to lead the party. AKK, as she is known, also seemed likely to become Merkel’s successor in the chancellery.

Having Her Power and Eating It

But all too quickly, the fault lines of Merkel’s succession project became visible: you can’t have your power and eat it. Merkel was determined to hold on to control over her government as well as her legacy, and AKK wasn’t ruthless enough to challenge her. As a result, her authority over the party was weak. Of course, she made mistakes, too, both as party leader and later as defense minister. Kramp-Karrenbauer’s doomed proposal for an international security zone in Syria—made with no prior consultation even within the German government—is just one example.

Nevertheless, AKK might have continued and recovered if not for the political impasse in the small eastern state of Thuringia. Regional elections last autumn resulted in heavy losses for the state’s Christian Democrats, who were then faced with a devilish choice: vote for a government led by the formerly communist Left Party, join votes with the far-right AfD to elect a state premier, or accept that no coalition can be formed and call for new elections.

The face and leader of Thuringia’s AfD is the right-wing extremist Björn Höcke, a wily player who managed to lure the CDU deputies into jointly voting for a Liberal candidate. For the first time, a mainstream politician in Germany gained office due to votes from the AfD. Outrage ran high, and the new state premier resigned after only a day. But for AKK, who proved unable to enforce her ban on fraternizing with the AfD, the damage was done. It didn’t help that Merkel interfered from abroad, calling the vote “unforgivable.” The Thuringia CDU has fallen in the polls since the scandal , while the Left Party is gaining support.

Kramp-Karrenbauer threw in the towel on Monday. In her statement, she included a sharp dig at Merkel. “Separating the chancellery from the party chairmanship, the open question of who will be candidate for the chancellery, this weakens the CDU,” she said.

Not So Quick

Yet AKK did not call for a quick changeover of power. According to the timetable she presented, she plans to remain in office as party leader of the CDU until the next regular congress in December. At that gathering, the CDU would choose a new chair, who would also be nominated as top candidate for the next elections. Merkel and her coalition government could remain in place until the autumn of 2021, according to AKK’s plan.

Can the CDU’s leadership issues wait that long? Possibly not, but Merkel’s would-be successors also recognize the dangers of being nominated too far ahead of an election. On Monday, Spahn, Merz, and Laschet all showed a great deal of restraint in claiming the top job.

Whoever it will be, whenever it happens—the new CDU leader’s job is not going to be easy. After nearly two decades of Merkel’s centrist policy, the party is torn between continuing along her line or moving back to the right. There is no consensus, either, about how to deal with the AfD’s success particularly in eastern Germany. After Thuringia, the next regional elections in the East will take place in Saxony-Anhalt and Mecklenburg-Vorpommern, very possibly leading to similar political impasses.

But after this Monday, one thing at least is clear: whether it takes 18 months or less, for Angela Merkel and the stable state she has come to represent, the countdown has begun. Brace for change in Germany and Europe.

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© REUTERS/Annegret Hilse

France had Jacques Chirac, who was mayor of Paris for 18 years before becoming president. In the United States, the former mayor of New York City, Michael Bloomberg, is now just behind the leading Democratic presidential contenders. Britain is governed by a former mayor of London, Boris Johnson.

In Germany, things are different. Berlin may be the country’s largest and coolest city. But it has been many decades since it last produced a politician who could win the national stage. Willy Brandt comes to mind—but it’s been more than half a century since he left Berlin to become the first Social Democratic chancellor of West Germany.

Not Exactly Willy Brandt

Today, another Social Democrat is governing Berlin. But Michael Müller, 55, governing mayor since 2014, is a far cry from his great predecessors Ernst Reuter or Willy Brandt. Müller who trained as an office clerk before joining his father’s printing company, has little standing within his own party or the wider German public. He is seen to be lacking in charisma, luck, and leadership.

At the national level, Germany’s SPD is a party in deep trouble, with a continued steep decline in the polls and an inexperienced and unpopular new leadership. Yet even against that backdrop, the Berlin SPD has a reputation of being difficult and quarrelsome. Müller, a member of the city’s legislature since 1996 and a longtime local party leader, has not been able to turn it into a team.

As a result, Müller received a painful rebuke at the SPD’s last national congress in December when he failed to win reelection to the Parteivorstand, the party’s executive body. And not for lack of space, either: the Vorstand currently has 34 members. But in the first round of the elections, only 168 out of nearly 600 delegates voted for Müller. He withdrew before the second round. “It’s not dramatic,” he commented, downplaying his defeat.

To further tarnish his reputation, a year-end survey found that Müller, mayor of a city that likes to think of itself as progressive and climate-conscious, is leaving an extra-big environmental footstep. Of all the official cars of the 16 German state premiers, his armored Mercedes needs by far the most gas and emits the largest amount of greenhouse gases.

Berlin’s political misery is not limited to the SPD. The last Christian Democratic mayor of Berlin to win fame was Richard von Weizsäcker who became federal president in 1984. Neither the Berlin Liberals nor the post-communist Left Party have been able to produce candidates with nation-wide appeal. Even the Greens, who have always had a strong base in Berlin, seem lackluster. Renate Künast, the city’s best-known Green politician, stepped down as group leader in the Bundestag in 2013.

A Little Help, Please

The reasons for the Berlin malaise are largely structural. After German unification in 1990, when the city should have turned into an exciting laboratory for bringing East and West back together, divisions persisted. East-West fault lines run through every party in Berlin, splitting and weakening both their members and voters.

But the biggest issue is the kind of dependency culture that developed in the Western part of Berlin—and which is still dominant in most of the city’s politics. When West Berlin became an island surrounded by territory under East German control and threatened by Soviet and East German forces, most big companies pulled out.

West Germany managed to stabilize the city by putting ever more civil servants on the public payroll and doling out wage subsidies to Berlin residents. Those transfers were cut after German unification, but the civil service remains skewed and inefficient even today. At the same time, the city’s economy still hasn’t fully recovered from the post-war exodus of its industry. Add to this the quick death of East Berlin’s antiquated manufacturing sector in 1990/91, and you get a place that is both used to and very much dependent on money earned elsewhere.

Not surprisingly, this favors etatist beliefs, particularly on the political left. Berlin, currently governed by a coalition of Social Democrats, Greens and the Left Party, uses the transfers it receives from richer regions in Germany to provide free kindergartens and school meals. Much more controversially, the city’s government has also decided to radically intervene in the strained housing market and force owners to cap or even lower their rents. The law, scheduled to be passed early this year, is certain to end up in front of Germany’s constitutional court.

More Hurdles Ahead

Even apart from this legal wrangle, 2020/21 will be a difficult time for Müller. In the fall of 2021, Berlin is scheduled to elect a new legislature and mayor. The polls for the SPD are miserable. At the last elections four years ago, the Social Democrats were shocked when they got less than 22 percent of the vote. Now they wish they could be that lucky.

Polls see them at 17 to 18 percent, behind the Greens, the Left Party and the Christian Democrats, and unlikely to be able to claim the mayor’s office again. Quite possibly, Müller may decide—or be forced to agree—not to stand again. Yet his most likely successor, Franziska Giffey, who holds the post of family minister in the federal government, is having a run of bad luck of her own.

In 2019, when she might have been a contender for the national leadership of the SPD, she was embroiled in accusations of plagiarism over her doctoral thesis. She emerged with her doctorate intact (though her thesis got some harsh reviews in terms of content), but now she has another problem: her husband, the newspapers reported recently, was kicked out of Berlin’s civil service. Apparently, he went off on holiday when he was supposed to be attending a conference.

Not Franziska Giffey’s fault if her estranged husband breaks the rules—but it is the kind of thing that is likely to look bad if you’re running for mayor. The Berlin malaise, it seems, is far from over.

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© REUTERS/Fabrizio Bensch

On Saturday morning, Chancellor Angela Merkel published her weekly video podcast. This one was about the importance of craftmanship in Germany, and how much it does for the vocational training of young people. Routine, happily boring routine, established over hundreds of Saturdays since Merkel first took office in 2005.

On Saturday night, the chancellor’s routine ended abruptly. Her junior partner in government, the Social Democratic Party, announced the result of its leadership vote: and—in a very unpleasant surprise for Merkel and arguably bad news for the SPD itself—the anti-establishment, anti-grand coalition faction won. As a result, the chancellor’s Saturday video messages may soon be history.

Instead of choosing Finance Minister and Vice Chancellor Olaf Scholz, a well-known and moderate politician who was strongly in favor of staying in government, SPD members voted for two virtual unknowns: Saskia Esken, a Bundestag backbencher, and Norbert Walter-Borjans, a former finance minister of the federal state of North Rhine-Westphalia. These two got the vote because they promised to take the SPD out of the Merkel coalition unless government policy changed dramatically to the left.

„I don’t believe that the grand coalition is the right constellation in the long run,” Walter-Borjans explained in a television interview. “But we’re in there, and that’s the basis on which we have to say what needs to be done. And if there is a blockade mentality on the side of the coalition partner, then the decision has to be taken that this cannot continue.”

An Inexperienced Duo

Esken, 58, has been a member of the Bundestag since 2013, specializing in digital policy. Yet she has never held office in government or a top position in the party before. Walter-Borjans, 67, has no parliamentary experience, though he was finance minister in Germany’s most populous state for seven years, between 2010 and 2017. While he made a name for himself fighting tax fraud, he also gained a reputation as a reckless spender. Walter-Borjans ran deficits that were so high that the state’s constitutional court judged his budgets to be unconstitutional several times in a row.

Most of the party leadership as well as the SPD group in the Bundestag had been backing Scholz, so the winning duo may find it difficult to gain support in Berlin. Esken and Walter-Borjans are also hampered by the narrow margin by which they won the contest: of the 425,000 SPD members, only 55 percent took part in the run-off. Of those who did vote, 53 percent opted for Esken and Walter-Borjans. Scholz and his running mate Klara Geywitz won 45 percent of the vote.

Political observers think it was a kind of Brexit vote, motivated by an anti-establishment sentiment against what many SPD members see as a distant and unresponsive party elite in Berlin. Similar to the Brexit referendum, the margin for the winning side is small, which is likely to weaken the new leaders’ legitimacy and deepen divisions within the SPD even further.

It’s a disappointing result for all those who had hoped that holding grassroots elections would help unite and renew Germany’s oldest political party—a party that has seen its election results decline ever more rapidly since the early 2000s.

According to the most recent Forsa poll (taken before the leadership count was announced), the SPD stands at 14 percent of the vote, far less than Merkel’s conservatives (27 percent) or the Greens (22 percent). It is only just ahead of the far-right Alternative für Deutschland (13 percent).

Conflicts Ahead

Walter-Borjans and Esken campaigned on a leftist agenda, calling for a huge boost in investment, more radical measures against climate change, and more generous subsidies for low pensions. They also want to introduce a wealth tax and raise the minimum wage to €12 per hour, a whopping 25-percent increase.

Many details remain open. The SPD will hold its annual party congress from December 6 to 8 to officially confirm Esken and Walter-Borjans in office. The two new leaders have announced that they will seek a vote about their agenda for the coalition. And while delegates are unlikely to back every measure that their two new leaders have proposed, some will certainly pass, leading to a massive conflict within Germany’s governing coalition.

Merkel’s conservatives, who are caught in a leadership struggle of their own, made it clear that they have no intention of giving in to any new demands from the SPD. Annegret Kramp-Karrenbauer, the embattled head of the Christian Democratic Union, pointed to the coalition agreement the SPD signed two years ago. “For the CDU, that’s the basis of the deal,” she said. “On this basis, we are willing to enact policy for Germany.”

A possible scenario is a truce over a Christmas and a blow-up early in the new year. If the SPD ministers walk out, Merkel could choose to continue with a minority government, a first in post-war German history—or call new elections.

A minority government would be unstable and unlikely to last to the end of the regular term in 2022, but it would provide Germany and Europe with an experienced leader—Angela Merkel—during the country’s EU presidency in the second half of 2020. More likely, however, are new elections, which could take place in March at the earliest. As the polls stand now, the result could be a coalition between conservatives and Greens, another first at the national level.

But Angela Merkel won’t be chancellor of that government.

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© REUTERS/Fabrizio Bensch

It’s a staggeringly ambitious project: build two ultra-modern highway and railway routes across Europe, suitable for automated vehicles as well as high-speed transport. Call it the “European Silk Road” to give people an idea of the scale intended. And even more challenging: spend a whopping €1 trillion, but don’t charge it to Europe’s taxpayers.

The Vienna Institute for International Economic Studies (WIIW) has drawn up detailed plans for the logistics and finances of this new Silk Road. It proposes building some 11,000 kilometers of new high-speed rail links and efficient motorways, which, in contrast to the existing system, would bypass local traffic and run in an express system.

The goal is quadruple: modernize the infrastructure, increase trade, give the European Union a common project, and do something sufficiently big and spectacular to compete with China’s Belt and Road Initiative (BRI). The proposed European Silk Road would not reach the overall volume of its Chinese counterpart, but it would increase the EU’s pull on those southern and eastern EU countries that are tempted by Chinese investment.

The estimated cost of €1 trillion—equivalent to seven percent of the EU’s GDP—will not need to be financed through national or European budgets, the WIIW promises. In a paper published in late November, the institute suggests setting up a public limited company that could issue bonds to pay for the works. The model for that would be the ASFiNAG, a company set up by Austria to finance highways.

In parallel, a European Sovereign Wealth Fund would be created to guarantee the bonds. WIIW believes that should not be too expensive, given the expected toll income on the highways and the current low interest rates. “Real interest rates are negative and infrastructure investment has the potential to finance itself,” said Mario Holzner, executive director of the WIIW.

Designs on the ECB’s Assets

But there is more to come—and this is the part that will be truly controversial: the WIIW wants to use part of the European Central Bank’s assets, or at least its profits, to finance the Wealth Fund. Even at a time when balanced budgets and orthodox monetary policy have lost much of their luster, this is bound to raise hackles—and nowhere more so than in Berlin.

“Much of Europe’s infrastructure is in a bad state, even in some wealthy parts of Europe, such as Germany,” argues Holzner. “Current European infrastructure initiatives are insufficient and piecemeal. The continent lacks a common, positive narrative – a common project that can be opposed to the forces of disintegration.”

© WIIW

According to the plans, there would be a northern route from Lisbon to Uralsk on the Russian-Kazakh border and a southern route from Milan to Volgograd and Baku, both to be served by a string of logistics centers, seaports, river ports, and airports in order to ensure a contemporary multimodal traffic.

Ambition on a New Scale

The idea of using infrastructure projects to create and advertise European added value is not new, though it has never been seriously discussed on this scale. Since the 1990s, the EU has been working on creating “Trans-European Networks” (TENs) in transportation, telecommunications, and energy.

Yet despite EU funding worth dozens of billions of euros, EU infrastructure continues to be a patchwork of national roads, railways, and grids that is plagued by bottlenecks. The next TEN revision is scheduled for 2023, but politically, the networks do not get talked about much anymore.

Jean-Claude Juncker, president of the last European Commission (2014 to 2019), chose a different approach: he invented the “Juncker Plan”, also known as the European Fund for Strategic Investment (EFSI). With the help of EU guarantees and the European Investment Bank, the fund has been supporting investments in areas such as infrastructure, energy, and research, and innovation. It has also helped small businesses by providing risk finance.

Juncker rated the fund a great success. After the first three years, it was extended to 2020. At the same time, its investment target was raised from €315 billion to at least half €1 trillion. Yet in early 2019, the European Court of Auditorsgave the project a mixed review. While it did finance many investment projects that could not otherwise have taken place, part of the money went to projects that could have used other sources of public or private finance. Estimates of additional investment attracted by EFSI were sometimes overstated, the court said.

By its very nature, the Juncker Plan had an additional disadvantage: because it was designed to benefit smaller projects and businesses, it did not give the EU much visibility. In that regard, Holzner’s European Silk Road plays in a different league.

“A ‘big push’ in infrastructure investment such as the suggested European Silk Road project in the current macroeconomic climate could help to solve both the problem of sluggish growth in the west of the continent and the developmental problems in the east,” the WIIW said. “Moreover, it could constitute a new narrative of cooperation for Europe.”

Up to Seven Million New Jobs?

The institute has calculated that the project would create between two and seven million additional jobs. Over the ten-year investment period, it would boost growth in the countries involved by an average of 3.5 percent. In addition, there would be sizeable trade effects.

“The project would also help to set new pan-European standards in technology and environmental protection along the route and beyond,” the WIIW added. “Solutions for future e-mobility and driverless vehicles, especially for the motorway and related areas would have to be found.”

Will the new Commission President Ursula von der Leyen push for a European Silk Road? Holzner presented his financing plans in Brussels in November, but official reactions have been sparse. Next, he is bringing his roadshow to France and Germany before trying to persuade other eurozone countries. It won’t be easy; the European Silk Road is a staggeringly ambitious project. But it is also a very interesting one.

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© REUTERS/Fabrizio Bensch

Isabel Schnabel is no dove. Germany’s nominee for the European Central Bank’s executive board is eloquent and persuasive; she holds strong opinions, and she knows how to make her views heard in a field still dominated by men. As an economist, Schnabel has often sharply criticized the ECB’s policies, especially its controversial asset purchasing program.

Yet the 48-year-old, who is a member of the influential German Council of Economic Experts, doesn’t represent German monetary orthodoxy. She may disagree with specific aspects of the ECB’s loose monetary policy, but she doesn’t oppose low interest rates on principle. Ideologically, she is probably much closer to the bank’s new president, Christine Lagarde, than previous German central bankers have been.

In addition, Schnabel takes a different view on fiscal policy from many mainstream economists in Germany. In the latest annual report of the Council of Economic Experts, which was published in early November, she gave a dissenting opinion on two key issues of budgetary policy: first, she argued that Germany should lower some taxes and increase public investment to support the lagging economy.

Schnabel’s second dissenting opinion concerned the Schuldenbremse or debt brake that sets strict limits on public deficits in Germany. In the longer term, Schnabel said, this debt brake should be reformed to allow for more public investment.

End of the Balanced Budget?

Such views are increasingly popular in Berlin, where the economic slowdown means that tax income is not increasing as quickly as in earlier years. Chancellor Angela Merkel’s coalition of conservative Christian Democrats and Social Democrats (if it survives, which is an open question) will find it much more difficult than in the past to spend its way out of internal disagreements. The days of a balanced budget seem numbered.

This makes Schnabel a very interesting choice for the German government—and a very different one from earlier appointments to monetary top jobs, Jens Weidmann, president of the Bundesbank and as such a member of the ECB’s governing council, and Sabine Lautenschläger, Schnabel’s predecessor on the bank’s executive board.

Weidmann is the ECB’s most outspoken critic of extremely low interest rates. He served as Merkel’s economic adviser before being appointed to the Bundesbank at the height of the euro crisis in 2011.

At that time, Germans—Merkel’s conservative bloc in particular—were deeply worried about the bailout programs that had been set up to save the eurozone. Risking German taxpayers’ money in order to keep spendthrift countries afloat was extremely unpopular. In that context, a Bundesbank president with strict views on monetary and fiscal discipline seemed like a last line of defense.

Lautenschläger joined the ECB’s executive board three years later, in 2014, when Spain and Portugal had already managed to exit the bailout programs, but Greece and Cyprus were still regarded as vulnerable. Again, Berlin chose a proponent of monetary and fiscal conservatism.

During her time at the ECB, Lautenschläger was as fiercely opposed as Weidmann to continuing the bank’s policy of easy money. While both did have some allies on the governing council, notably the central bank presidents of the Netherlands and Finland, the majority of southern European countries generally backed outgoing president Mario Draghi’s policies.

A Constructive Influence

Lautenschläger stepped down at the end of September, three years before the end of her term, following an ECB announcement that it would lower interest rates even further and resume its controversial asset purchase program. Draghi had pushed through those decisions just six weeks before the end of his mandate, causing an outcry in Germany.

At the time, Schnabel was still a professor at Bonn University, albeit a specialist on eurozone reform and banking regulation, and had no inkling that she might be asked to join the ECB in the near future. Yet in an interview with the business daily, Handelsblatt, she strongly defended the central bank.

“Of course, you can disagree about specific measures,” Schnabel said. “But if politicians, journalists and bankers reinforce the narrative that the ECB is stealing German savers’ money—that’s dangerous. It will come back to haunt us one day.” Schnabel pointed to Britain, where the EU was used as a scapegoat for many years. This was now leading to Brexit, she said. “In Germany, the ECB is constantly being made into a scapegoat.”

Such opinions certainly won’t hurt Schnabel in her new job. More importantly, her differentiated approach toward the ECB’s monetary policy may gain her more influence than Weidmann and Lautenschläger had. Schnabel is a good communicator, and it helps that she is an economist while both Lautenschläger and Lagarde are lawyers by training. If she teams up with Lagarde, the only other woman on the bank’s executive board, both could benefit.

“The ECB’s Executive Board is running out of economic skills,” ING analyst Carsten Brzeski wrote in late October. “With Schnabel, Germany would have an excellent economist on the board, who has been rather supportive of the ECB’s monetary policy decisions of the last years (…) Schnabel could also emerge as a Lagarde whisperer, giving Germany a much better and much more constructive influence on ECB decisions than the traditional nein.”

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© REUTERS/Arnd Wiegmann

When, just months after Germany’s reunification, I arrived in Dresden as a young reporter I suddenly landed in a very different world. A far darker one: the streetlights were dim and few and far between. Shop windows were tiny and dark at night. To find a rare restaurant, you had to know where you were going.

Buildings, unpainted for decades, were a uniform dark grey, their plaster crumbling. Balconies were often barred for fear they might collapse. Smells were different, too, with the sharp aroma of the lignite coal used for heating or the thick scent of the oil burnt in the Trabant two-stroke engines.

Factories were woefully outdated, roads narrow and bumpy, offices stuffy and overheated. I learnt that whoever had a home phone had probably been close to the communist power structures of the German Democratic Republic. Anybody else just dropped in or left notes on the door.

Dresden in 1991 was very different from the cities I already knew in West Germany or elsewhere in Western Europe. But it was also a world apart from East Berlin where after the fall of the Wall the pace of change had been much quicker. I spent nearly two years in Dresden—a time that profoundly shaped me and my views on recent German history.

Influx from the West

It was a heady time. We were part of history happening all around us, and we had the conviction that the world was taking a turn for the better. But even then, not everything was rosy. Many of today’s difficulties have their origins in the post-Wende era. (Wende, meaning turn-around, is the word most Germans use for the peaceful revolution of 1989.)

The biggest issue, I believe, has been the dearth of East German leadership.

In Dresden in the early 1990s, I was one of very few Western reporters who came to live in the city. It was different for public administration and business. Most top positions were soon filled with West Germans from Bavaria or Baden-Wuerttemberg who came to live and work in East Germany for a stint. Many of them were good people, and without them, unification—bringing the West German rule of law with all its sophisticated bureaucratic details to the East—could not have happened so quickly.

Initially, most Dresdners whom I talked to approved. They did not want to deal with yesterday’s communist officials, the representatives of a state they had just gotten rid of, when applying for a building permit or unemployment money. They had more trust in people from the West. Soon enough, however, sentiment turned, and the West Germans were increasingly seen as colonizers imposing their system on East Germans.

Stasi Informers Revealed

At the same time, as the files of the German Democratic Republic were opened, more and more information trickled out about the enormous number of East Germans—nearly 200,000 out of a population of 16.4 million in 1989—who had been secret informers for the Stasi, the infamous East German secret police.

A shocking number of the younger East Germans I met in Dresden—smart, ambitious people, charismatic, with leadership qualities and energy to spare—were revealed to have been informers. Spying on their relatives, friends, neighbors, colleagues, listening in to conversations, writing down damaging titbits of information about people close to them. Not a crime as such, but rightly considered to disqualify anybody from holding an important office, be it public or private.

And so, one by one, many of young leaders disappeared from the scene—here an energetic deputy in the Saxony state assembly, there a representative of Dresden’s chamber of commerce or a capable civil servant in one of the ministries. That the Stasi had contaminated and spoilt so many of the best, brightest people in East Germany was a tragedy, enormously painful for everybody involved and with very far-reaching consequences.

The Ugly Truth

Few of those informers, incidentally, were blackmailed or pressured by the Stasi into signing up. Many were attracted by the promise of being able to make a difference, of change being possible, if only people in power knew what was really happening. Flattery and material rewards were added bonuses.

One thing I learned from my Dresden friends, however: Do not gloss over the ugly truth of what informing means. If you—as a West German who were lucky enough not to grow up in such a corruptive system—think that anybody might have been sucked in, think again. You are belittling the courage and honesty of those who dared turn down the Stasi’s invitation to become one of theirs.

The erosion of the East German elites continues to this day. Not through Stasi poison, that’s long over. But for nearly 30 years now, a large share of the most talented young people from the East have moved to western Germany or beyond for more opportunities and a better life. It’s estimated that nearly 5 million East Germans have left since 1990; partly replaced by 3 million people who moved from West to East.

Vacuum Filled by the AfD

The most painful blow to those staying behind is the fact that a particularly high share of well-educated young women left. This means that many eastern German regions have been drained of initiative, optimism and leadership—and that too many young men have had to remain single. The East-West migration left a vacuum that is now being successfully exploited by the rightwing populist Alternative für Deutschland (AfD). Ironically, many of its leaders are West German in origin.

Yet it didn’t take the AfD to introduce racism, xenophobia, and Nazi ideas to East Germany. In the post-Wende Dresden, even Poles and Czechs from just across the border were regarded with suspicion and dislike. The Vietnamese guest workers who had come to the German Democratic Republic on a state contract were kept isolated in their barracks and deeply despised.

I vividly remember one day in 1991 when I was doing an interview at the headquarters of the Dresden police. As we were talking, we heard shouts of “Heil Hitler!” I went to the window and watched. A group of skinheads were marching across the courtyard doing the Nazi salute while police officers looked on and did nothing.

Neo-Nazi Riots

Those officers weren’t neo-Nazi sympathizers. They were caught in transition from one set of government to an entirely different one, unfamiliar with the new rules they were supposed to apply, and completely overwhelmed by the situation. A few years earlier, neo-Nazis would have been manhandled into prison; a few years later, they would have been facing criminal proceedings. Just then, however, they were allowed to walk about in triumph.

This vacuum helped neo-Nazis spread their ideas, as did boredom and the growing fear of losing out, of having been left behind. In September of 1991, I covered the riots in the small eastern city of Hoyerswerda, the first massive attack on foreigners. For days, neo-Nazi skinheads threw stones and firebombs at a hostel for Vietnamese workers. When those workers were eventually evacuated, the neo-Nazis switched their attacks to a refugee home a few streets away.

I will always remember Hoyerswerda, not just because the police were unwilling and unable to stop the riots. The most bizarre aspect was the attitude of the local crowd that had come to watch the attacks. It was like a festival: people took photos, applauded and commented. There were a lot of old people, but parents had also brought their small kids, some of them sitting on their fathers’ shoulders in order to have a better view.

What a break from small-town boredom—and what a disastrous signal to the right-wing groups then forming. Over the next several years, those riots were followed by attacks on foreigners all over Germany, but particularly in the East. Often enough, West German Nazis helped with money and expertise, but the biggest factor for being able to establish lasting structures was the weakness of the police and the judiciary.

Benefit of Hindsight

Today, the streets of Dresden are well-lit and filled with modern, shiny cars. In many towns around Saxony and beyond, the old centers have been beautifully restored. Industry is thin on the ground, but where it does exist, it is modern and competitive. The road signs for “Industrie-Nebel” (industrial fog) that warned drivers about the deep yellow smog in the coal-mining region south of Leipzig have disappeared for good.

No doubt, some, or even many, aspects of unification could have been handled better—with hindsight and without the frantic pace forced by events at the time.  Nearly 30 years on, two of the biggest problems that became so clearly visible after the Wende still shape East Germany’s landscape: the lack of a dynamic, indigenous leadership, and the spread of an illiberal, racist ideology. Both are related, I strongly believe, and it will take the rebuilding of local elites to create a better future for the whole of Germany.

Still we need to be aware that not everything that happened in the 30 years since the Wende is negative, despite the problems German unification brought to the region. Overall, in terms of democracy, personal freedom, prosperity, health, rule of law, or even environmental protection, it continues to be a fantastic success.

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© REUTERS/Michaela Rehle

Are today’s right-wing populists in Germany using the same language as Adolf Hitler? An interesting journalistic experiment with Björn Höcke, leader of the most radical faction within the Alternative für Deutschland (AfD), certainly suggests so.

Höcke, 47, was a history teacher before entering politics and turning into the AfD’s far-right star. He is an intelligent, well-educated man who knows what he is doing when he speaks about the “thousand-year Germany” and calls the Holocaust Memorial in Berlin a “memorial of shame.”

More moderate AfD leaders—who have since left the party—have tried in vain to get Höcke expelled from the AfD for his revisionist, racist views and his closeness to neo-Nazi groupings. Instead, it is the party that has become more radical, particularly in eastern Germany, where it is most successful.

In regional elections on September 1, the AfD received 27.5 percent of the vote in Saxony and 23.5 percent in Brandenburg. Another strong showing is expected when Thuringia goes to the polls on October 27. Under Höcke’s leadership, the state’s AfD can expect up to 25 percent of the vote—a result that would certainly accelerate the radicalization of the party as a whole.

An Unusual Interview

Against this backdrop, Germany’s ZDF television received a lot of attention with an unusual interview with Höcke. To prepare for it, the reporter took two quotes from Höcke’s book Nie zweimal in denselben Fluss (“Never twice in the same river”) and showed them to AfD deputies in the Bundestag. These were then asked on camera to judge whether the quote originated with Höcke or with Adolf Hitler’s Mein Kampf.

“A few corrections and small reforms won’t be enough, but the German absoluteness will guarantee that we will tackle the matter thoroughly and fundamentally,” the first quote said. “Once the turning point has come, we Germans will not stop half-way, and then the mounds of debris of modernity will be eliminated.”

Most of Höcke’s fellow AfD members started laughing when asked about the origins of the quote. Not one of them could answer. “No, I am not going to commit myself,” said Jens Maier, a leading far-right figure from Dresden. “But if I did, I would rather say from Mein Kampf but not from Mr. Höcke.”

Höcke’s second quote did not fare any better. “The longing of the Germans for a historical figure, who will once again heal the wounds of the people, overcome the strife, and put things in order is deeply rooted in our soul.”

So was it Hitler or Höcke? “I don’t know,” answered one AfD deputy. “I can’t answer that,” a second one said. The third interviewee took a bit longer. “I won’t be able to answer that question, because I did not read Mein Kampf, and whether it’s from Höcke, I don’t know.”

Interestingly, not one of the AfD politicians took offense at being asked to compare a 20^th century dictator responsible for murdering millions of Jews and starting World War II with their fellow party member. Nor did any of them think to warn Höcke about the ZDF journalist’s line of enquiry.

“Too Poetic Sometimes”?

When confronted with these answers, Höcke was clearly surprised. As the reporter showed him his fellow party members on a tablet, he gave a cautious smile. A pity that they didn’t read his book, he said. “I think it’s good that we have politicians again, who have the courage to express themselves in an original way and use a language that sometimes is too poetic,” Höcke added. “This must be possible.”

The interview with Höcke continues for several minutes more. The reporter points to occasions when Höcke has used Nazi terminology like “Lebensraum” or “degenerate,” while Höcke denies there is even such a thing as Nazi speak.

Finally, Höcke’s press spokesman intervenes. He explains that Höcke was not expecting any such questions and has answered in an “overemotional” way. He then asks the reporter to repeat the interview. The ZDF journalist refuses, however, and publishes the original version despite Höcke’s threats of “massive consequences.”

A Political Paradox

So what are the lessons from this interview? The first one is an insight into how far the AfD, a party founded as a conservative, euroskeptic movement, has moved toward the far-right. Höcke’s Facebook account shows his supporters firmly behind him (“Great guy, did everything right”). Not a murmur, either, from the national leadership of the party in Berlin.

Yet—and here’s the second lesson—what plays well in eastern Germany may not work for the western part of the country. Here, polls show the AfD stagnating at around 12 percent, only half of what it scores in the east. And even among those 12 percent, the share of Höcke supporters is far smaller.

The result is a political paradox: with its astonishing success in the east, the AfD may be risking its ambitions at the national level. Easterners may be more radical, but western Germans have the numbers.

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