The traffic light coalition has had a turbulent first year. Crises determined everyday life, and there were always problems in the red-green-yellow alliance. The dark chocolate that Chancellor Scholz (SPD) distributed to his ministerial team for the one-year anniversary hit the mood in the coalition quite well.
Scholz shouldn’t have too many hopes that things could get quieter in 2023. It is difficult to predict how the Ukraine war and the situation in Germany will develop. And four state elections could also influence government policy in Berlin.
Should the economic situation deteriorate, further relief be necessary and the dispute over the debt brake flare up again, things could get uncomfortable in the coalition. After all, in November, in a relaxed atmosphere in the chancellor’s apartment at the government headquarters, the leaders had vowed to present a better public image in the future after a bumpy first year. How long this will last remains to be seen. The challenges are immense.
Are the current reliefs for people sufficient?
The government put together three packages in 2022, with one-off payments, tax breaks and cheap train tickets. From March, the prices for electricity and gas for private households and small and medium-sized companies will also be capped, and retrospective relief is planned for January and February. For large industrial consumers, the gas price brake should take effect from January. Consumers with oil and pellet heating systems should also be relieved. Whether that will be enough to help citizens through the high inflation remains to be seen. A shrinking economy cannot be ruled out. The full gas storage facilities could be emptied again, with prices rising further and the situation becoming even more critical.
Finance Minister Christian Lindner has already emphasized that he believes further tax breaks are necessary. The FDP boss has more companies in mind. The SPD and the Greens, on the other hand, let it be known that if necessary they also want to put together new aid packages for the citizens. Nevertheless, Lindner definitely wants to comply with the debt brake in 2023. A big unknown is rising interest rates. New relief packages would probably require a supplementary budget – and the Bundestag would have to allow an exception to the debt brake again.
Is the energy supply in Germany secured?
The German gas storage facilities, which are important for the heat supply, were almost completely full at the end of November; the cold December days initially caused the filling level to drop significantly. Most recently it rose again slightly with the mild Christmas days, but was still well below the 90 percent mark. The operators of the gas storage facilities are betting that Germany will “get through the winter well”. The head of the Federal Network Agency, Klaus Müller, nevertheless warns not to become careless.
It will be interesting next winter. Economics Minister Robert Habeck (Greens) is counting on several terminals for importing liquefied natural gas (LNG) on the German coasts being in operation by then. In the future, they could compensate for a large part of the loss of Russian gas. A first LNG terminal has now started in Wilhelmshaven, and shortly before Christmas the first gas was fed into the grid here.
The last three German nuclear power plants should continue to run until April 15th. In addition, coal-fired power plants are going back online to generate additional electricity. Electricity is still becoming more expensive, and the expensive electricity generation from gas-fired power plants often determines the price of electricity for all other types of generation in the wholesale market. The federal government wants to counter this with the price brakes for gas and electricity, but emphasizes that these could only dampen rising costs.
An oil embargo against Russia will also take effect from January. Berlin is looking for new suppliers. The PCK refinery in Schwedt in north-eastern Brandenburg recently received European crude oil for the first time via the port in Gdansk, Poland. So far, the refinery has mainly processed Russian oil. However, it is unclear whether the plant can be used to full capacity with alternatives in the future.
What’s next for climate protection?
The traffic light coalition started with great climate ambition. As of now, however, Germany is clearly missing its climate targets for 2030, according to the Federal Government’s expert council. Germany actually wants to reduce its emissions of greenhouse gases by at least 65 percent by 2030 compared to 1990. There is a big gap in the transport sector in particular. This will not be closed with the planned immediate climate protection program. The government therefore wants to improve traffic in the spring. The phase-out of coal in the Rhenish mining area is to be brought forward by eight years to 2030. In the East German coalfields, an earlier phase-out of coal is still open.
Economics and Climate Protection Minister Robert Habeck (Greens) wants to accelerate the pace of the expansion of renewable energies with less bureaucracy and faster procedures. According to the expert council, solar systems and wind farms at sea are still progressing too slowly, but things are looking better for wind farms on land. After all, Habeck took stock at Christmas that the expansion of green electricity had progressed overall and that the “valley of tears” had passed.
Intermediate reports for the traffic light: four state elections
As in 2022, four state elections in the coming year have the potential to bring unrest to the coalition. Due to numerous election mishaps in 2021, those eligible to vote in Berlin will have to cast their votes for the House of Representatives and district parliaments again on February 12. The coalition of the SPD, the Greens and the Left Party is currently gaining a majority in polls. In the end, however, the Greens could have the edge and challenge Franziska Giffey from the SPD for the mayoral post.
A good three months later – on May 14 – Bremen follows, where Mayor Andreas Bovenschulte (SPD) would like to move back into the town hall. He is currently leading a red-green-red alliance, analogous to the capital.
It will be exciting in autumn in Hesse and Bavaria. For the traffic light coalition in the federal government, these state elections represent a kind of interim report at the halfway point in the legislative period. In Hesse, the CDU and the Greens have governed mostly without conflict since 2014. According to a survey from October, Black-Green could continue to rule. If Federal Interior Minister Nancy Faeser decides to run for the top SPD candidate in Hesse, Chancellor Scholz would have to reshuffle his cabinet.
In Bavaria, the CSU dream of being able to govern alone again after five years of coalition with the Free Voters is currently a long way off. Around 40 percent of the voters approve of the Christian Social Party leader and Prime Minister Markus Söder in surveys, around 10 percent of the free voters. The Greens are almost twice as strong, but Söder has stopped ensnaring them.
What is in store for Germany in terms of foreign policy?
The consequences of the policies of Russian President Vladimir Putin are likely to determine the foreign policy agenda of federal politics in 2023 as well. At the turn of the year, Germany hands over the presidency of the G7 group of economically strong democracies to Japan. Tokyo is also a close ally in the increased German engagement in the Indo-Pacific region announced by Foreign Minister Annalena Baerbock (Greens). The aim is to curb further global influence by Beijing – including in Africa and Central Asia. And also about gaining access to energy sources and important raw materials for the energy transition and digitization.
The government intends to adopt a new national security strategy by the time of the Munich Security Conference. After that, a separate strategy for dealing with China should be decided. Dependencies on Beijing are to be reduced, human rights are to be given greater importance and relations with Taiwan are to be expanded. There are also difficult issues with the USA. For example, Berlin fears that European companies will migrate to the USA as a result of the Anti-Inflation Act of President Joe Biden’s government.
Herculean tasks in other areas
The traffic light coalition also faces major challenges in other areas. The modernization of the Bundeswehr announced with Scholz’s “Zeitenwende” speech must get underway – in mid-December the Bundestag gave the green light for projects worth billions, including the procurement of the F-35 stealth jet. Rules on immigration should come in order to counteract the shortage of skilled workers in many areas. The fight against right-wing extremism and activities of the “Reichsbürger” scene remains a permanent task.
