DARE MORE PROGRESS: Freedom, Justice, and Sustainability are Germany's new leitmotifs.

On November 24, the Social Democratic Pary (SPD), the Greens, and the Liberal Party (FDP) presented the coalition agreement for the next four years of government. The paper is the result of almost two months of negotiations that aimed at forming the first three-party coalition and the first government after sixteen years of Angela Merkel. Two weeks later, Olaf Scholz, SPD candidate and Minister of Finance in the previous government, was elected Bundeskanzler (Chancellor) and took office on December 8. Now Germany has a new leader, a new government, and a new agenda.

The parties called their coalition ‘traffic light’ referring to their colors: red for SPD, yellow for the FDP, and the Greens. Briefly, the traffic-light coalition will increase the minimum wage, respect the balanced budget amendment, implement the coal phase-out, and legalize cannabis. Post-Merkel Germany will revolve around these new axes.

Voting rights & Cannabis

The new government is committed to lowering the active voting age for elections to the Bundestag and the European Parliament to 16. The traffic light coalition also wants to revise the electoral law “within the first year” to prevent the Bundestag from growing. Furthermore, the government wants to introduce the controlled distribution of cannabis to adults “for consumption purposes” in licensed stores. This reform would supervise quality, prevent the distribution of contaminated substances and ensure the protection of minors. The regulations for marketing and sponsorship of alcohol, nicotine, and cannabis will become more restrictive.

Minimum wage & Housing

The statutory minimum wage should increase to 12 euros per hour in a one-off adjustment, hence overcoming the current wage of 9.60 euros per hour. The minimum wage commission is then to decide on further increases and adapt it to the national and international circumstances. In addition, the coalition agreement outlines the goal of building 400,000 new homes per year, including 100,000 publicly subsidized homes. An “affordable housing alliance” will be established, and a new non-profit housing scheme with tax incentives and investment subsidies is to be launched immediately. The rent brake will be extended and tightened. In areas with a tight housing market, rents will be allowed to rise only up to 11 percent within three years instead of up to 15 percent as before.

Climate

The traffic light coalition wants to bring forward the coal phase-out. “Ideally, this will already succeed by 2030,” the agreement said. This eight-year process will revolve around the expansion of wind and solar power. By 2030, 80% of electricity consumption is to come from renewable energies. This will require more gas-fired power plants. The partners want to more than the triple solar capacity to 200 gigawatts (GW), by making photovoltaics mandatory on commercial roofs, among other things. They also want to accelerate the expansion of offshore wind energy, which is to climb to 30 GW in 2030 (previously 20 GW). Two percent of Germany's surface area is to be reserved for onshore wind energy. The phase-out of coal is also to be accelerated via European trading in CO2 pollution rights. The coalition, therefore, intends to lobby the European Union (EU) for a minimum price for these certificates, which power plants require. If this is unsuccessful, it will be fixed nationally such that the price does not fall below 60 euros per ton. In the future, climate protection will be more strongly integrated into the decisions of the German government than in the past. Each ministry is to review its draft laws for climate impact and compatibility with national climate protection targets and provide an appropriate justification — the so-called climate check. The Federal Climate Protection Act will be further developed “consistently” before the end of 2022, and an emergency climate protection program will be introduced.

Nuclear weapons

The new federal government wants to abandon Germany's fundamental rejection of the United Nations Treaty on the Prohibition of Nuclear Weapons and thus deviate from the previous. Germany will participate in the Conference of the Parties as an observer. The controversial treaty banning nuclear weapons was adopted by 122 of the 193 countries of the United Nations in 2017 and entered into force at the beginning of this year. It prohibits the possession, acquisition, development, and deployment of nuclear weapons. All nuclear powers, as well as all NATO countries, and thus also Germany, have so far rejected it because they considered the previous treaties to be a better basis for nuclear disarmament.

Transport

Starting next year, the regional funds for local transportation will be increased. Quality criteria and standards for services and accessibility for urban and rural areas will be defined by both the federal states and local authorities together. Deutsche Bahn AG will be retained as an integrated group, including the group's internal labor market, under public ownership. Internal structures will be made more efficient and transparent. The infrastructure units (DB Netz, DB Station und Service) of Deutsche Bahn AG will be merged into a “new infrastructure division oriented toward the common good.” Cross-border traffic will be strengthened and night train services developed with the EU and the member states. By 2030, 75 percent of the rail network is to be electrified. Germany aims to become the lead market for electromobility, with at least 15 million electric cars in 2030. The SPD, Greens, and FDP also want a reform of the truck toll. In 2023, a “CO2 differentiation” of the truck toll is to be implemented. Commercial road haulage of three and a half tons or more will be included in this toll, and a CO2 surcharge will also be introduced — on condition that a double burden from the CO2 price is ruled out.

Migration and right to stay

Visa issuance is to be accelerated and increasingly digitized. Residence permits should not expire during temporary stays abroad. The “complicated system of toleration” is to be reorganized. “Well-integrated young people,” up to the age of 27, will be allowed to stay after three years of residence in Germany. People who have lived in Germany for five years by January 1, 2022, have not committed any criminal offenses, and are committed to the free democratic basic order will be able to obtain a one-year probationary residence permit. For faster asylum procedures, the new coalition wants to relieve the Federal Office for Migration and Refugees. “We want faster decisions in asylum proceedings, as well as a standardization of jurisdiction and will quickly present a bill to this end,” the three parties announced.

Financing

The Balanced Budget Amendment enshrined in the Basic Law is to be complied with again starting in 2023. In the coming year, however, new loans will have to be taken out again due to the ongoing consequences of the Covid-19 pandemic. Municipalities with high levels of old debt are to be relieved. “In 2022, there will also be continuing pandemic consequences to deal with, which will continue to constitute an exceptional emergency in the sense of the debt rule,” the agreement said. “Beginning in 2023, we will then limit debt to the constitutional margin provided by the debt brake and comply with the debt brake requirements.”

Foreign Policy

The signal of continuity in German foreign policy could not have been clearer. At the G20 summit in Rome, Chancellor Angela Merkel (CDU) and her vice-chancellor and successor Olaf Scholz (SPD) took part in a virtual duet and completed all the important talks together.

The administration of U.S. President Joe Biden continues to rely on a strong Germany that assumes responsibility within the EU, NATO, and the international community. The U.S. will pay particular attention to how the new German government positions itself vis-à-vis China and Russia. Washington D.C. is pushing for a more confrontational approach to its strategic rival, whereas Merkel's government has tended to focus on dialogue and good trade relations.

As for China, Merkel is already sorely missed in Beijing because she spoke her mind honestly, but also always showed understanding for China and pursued a more business-oriented China policy. Beijing hopes that Scholz is also aware of how dependent Germany is on economic cooperation with China. Yet, the Greens and the FDP not only want to do more for human rights, including the persecution of Uyghurs and Tibetans and the situation in Hong Kong but also advocate free trade and fair market access. This last aspect resonates well with the increasing tensions between Beijing and the U.S. Further developments will become more visible in the future.

Back to Europe, Russia does not expect a fundamental improvement in its relationship with Germany given the severe tensions of recent years. Moscow-based Germany expert Vladislav Belov, however, expects the chancellor to continue to set the foreign policy lines. He does not see a new confrontational course under Scholz. “The coalitionists are not starting from ‘red lines’ but a constructive approach,” said the head of the Germany Center at the European Institute of the Russian Academy of Sciences.

On the other hand, Turkey will likely face a tougher course from the new German government concerning human rights issues and the EU-Turkey refugee deal. Both SPD and the Greens are committed to emphasizing the respect of human rights and the right to asylum.

Concerning Israel, a policy of continuity can be expected from the traffic light government as a whole. The new government is also committed to a two-state solution in the Middle East. Meanwhile, Palestinians are expected to make “progress on democracy, the rule of law and human rights.” Israel is expected to halt settlement expansion in the Palestinian territories and, hence, promote a future peace settlement.

Finally, the EU expects a solid continuation of Merkel’s European commitment. With the SPD, the Greens, and the FDP as pro-European parties, Paris expects a certain continuity of previous German policies. Scholz, as an already well-known and experienced politician, gives Paris a certain degree of security and is seen as a desirable partner. Some concerns might arise due to different views between the Greens and the FDP. France also observes the way Germany will combine climate investments and strict debt policy. The strengthening of the collaboration with Italy has also become a further point of the EU balance.

Thus, the new German government entails both continuity and rupture with the Merkel era. Although Olaf Scholz should preserve, if not even strengthen, Germany’s transatlantic and European commitment, the coalition will adopt a more liberal line for national politics and a harder approach with regards to human rights and the rule of law abroad. Post-Merkel Germany has taken its first steps, the race has just begun.

- Florian Heydecker