The government in Germany led by Chancellor Olaf Scholz’s Social Democratic Party collapsed Dec. 16 after losing a confidence vote in parliament. Germany, with Europe’s largest economy, has a caretaker government until new elections Feb. 23.
Scholz’s fractious coalition, which included the Greens and the Free Democrats, came apart the month before. The issue was whether to put aside Berlin’s self-imposed “debt brake” on government spending to provide funds to try to alleviate the unfolding economic crisis there.
Germany’s rulers, and those in France, the European Union’s second largest power, are both in political disarray with their economies mired in stagnation and debt. Berlin is wrestling with a foreign policy crisis as instability from Moscow’s war against Ukraine wreaks havoc. Competition with their rivals, especially the rulers in the U.S. and China, is sharpening over markets and resources. And working people across Europe are resisting the rulers’ efforts to saddle them with the burden of a crisis not of their making.
For decades the ruling families in Germany, and to a lesser extent in France, have used their domination of the EU to enrich themselves on the backs of working people, especially by squeezing their weaker rivals in Greece, Italy and elsewhere in southern Europe.
As the worldwide 2008 financial crisis unfolded, German and French finance capital demanded the rulers in Greece and elsewhere resolve their skyrocketing debt by deep social spending cuts, forcing working people to shoulder the burden. Now those economies are faring better than their northern neighbors.
France’s fourth government in a year was sworn in Dec. 23. A political deadlock has deepened since President Emmanuel Macron called snap elections in June, which left no party with a majority.
Putin’s war fuels Germany crisis
In the wake of the February 2022 invasion of Ukraine by Russian President Vladimir Putin, capitalist powers across the globe, including Berlin, have pushed to strengthen their militaries. Their goal is to position themselves to defend their sources of raw materials, export markets and profits at the expense of their rivals.
The German rulers can no longer simply rely on the U.S. nuclear umbrella and the NATO alliance to defend their interests.
Berlin is the second-biggest supplier of arms to Ukraine after the U.S., but has resisted Kyiv’s repeated requests for long-range missiles. Washington redeployed cruise missiles in Germany last year, a move that won cross-party support in Berlin. But one Social Democratic Party official noted, “We are entering a spiral in which the world is becoming increasingly dangerous.”
Scholz and his main opponent, Friedrich Merz, leader of the Christian Democrats, are sharply divided on foreign policy. Merz said his rival justifies his half-hearted support to Kyiv by fanning “fears of war,” while Scholz accuses Merz of “playing Russian roulette with Germany’s security” by issuing ultimatums to Moscow.
Scholz calls Merz and former coalition partner Robert Habeck, leader of the Greens, “hotheads” who could drag Berlin into war with Moscow. At the same time, Scholz’s defense minister, Boris Pistorius, is pushing to expand Germany’s debt to pay for a more rapid military buildup. “If Putin attacks, we need to be able to wage war,” he said Dec. 21.
Since Moscow invaded Ukraine, Washington has boosted its standing troops deployed in Germany to 50,000. And it stores nuclear weapons at one of its two air bases there. Thousands more U.S. forces now rotate through Poland, Romania and Bulgaria.
Amid the capitalist crisis, which hits workers in eastern Germany especially hard, the Alternative for Germany, a more conservative bourgeois party, has gained popularity. Liberal commentators and the middle-class left see all politics as a left-right divide, bemoaning the growing strength of the “far right” across Europe. They are incapable of seeing the underlying class antagonisms deepening today.
Layoffs, union actions grow
For decades German industry was dependent on cheap gas imports from Russia. Putin’s invasion of Ukraine brought this to an end. Berlin’s transition to shiploads of liquefied natural gas caused a 40% jump in prices.
Electricity prices in Germany are now the highest in Europe. Power prices in the EU are almost double those in the U.S. and China, both of which rely on coal and gas. As part of the German rulers’ drive for a “green” future, Berlin shut its last three nuclear power plants in 2023 and plans to phase out coal-generated power. Many Germans now use a new word to describe winter power shortages when the country’s solar and wind power wanes — Dunkelflaute or dark doldrums.
Amid weakening global markets, falling profit rates and intensified competition, capitalist powers are looking to wield retaliatory tariffs. The EU is now raising protectionist barriers at the fastest rate in 15 years.
Since 2018, industrial production has shrunk by over 12% in Germany, the world’s third-largest exporting nation. Bosses there responded by announcing plans to slash more than 60,000 jobs, which triggered strikes and protests by the unions. These cuts are centered in the auto industry.
Thyssenkrupp, Germany’s largest steelmaker, says it will cut 40% of its workforce of 27,000 by 2030. Bosch, the huge car parts supplier, plans to lay off up to 10,000 workers. Germany’s auto industry faces deepening competitive pressures, especially from China.
Thousands of German workers mounted nationwide strikes to press for higher wages Oct. 29. Unionists walked out at Porsche, BMW and Mercedes.
Over the past five years Volkswagen’s sales dropped by 50% in China, its most profitable market, and by about 500,000 cars in Europe. VW bosses recently announced plans to shutter several German plants in the name of “long-term competitiveness.”
German autoworkers held walkouts and rallies twice in December, and their unions threatened a larger strike if the bosses carry through on the closures and layoffs. Scholz and other politicians said they oppose any factory closures, at least before the coming elections.
The VW bosses responded by reaching a deal. Union officials agreed to pay cuts for workers in exchange for “capacity reduction for the German factories but no closures.” VW now says it will cut 35,000 jobs over the next five years through retirement and voluntary redundancies.