Published in the Australian Financial Review (Sydney), 21 February 2025
Merkel’s 16 years of drift and Scholz’s three years of mismanagement have left Germany’s problems too deep for quick fixes – that is the price for too many years of politics without leadership.
When Olaf Scholz campaigned for the chancellorship in 2021, he presented himself as Angela Merkel’s natural heir.
The pitch was simple: another reliable, steady leader who would manage Germany without unnecessary drama. Like Merkel, he cultivated an image of being solid, a bit boring, but fundamentally competent.
Three years later, there is nothing left of Scholz’s promise. His so-called “traffic lights coalition” has collapsed. The economy is stagnating. Germany’s international standing has diminished.
German Chancellor Olaf Scholz said violating borders would be a breach of Western values.
Olaf Scholz’s failure was his refusal to adapt to the new circumstances brought on by Russia’s invasion of Ukraine, which derailed the government’s plans. AP
In fairness, not all of this is Scholz’s fault. Russia’s invasion of Ukraine derailed many of his government’s original plans.
But Scholz’s failure was his refusal to adapt to these new circumstances. When he should have thrown out the old, pre-war coalition agreement, he clung to his familiar politics of muddling through.
Scholz’s chancellorship failed in three big ways. First came economic mismanagement. Under his watch, Germany’s competitiveness eroded at an alarming pace. Energy costs soared. The complexity of bureaucracy increased. Major manufacturers began shifting production abroad.
Then, in November 2023, the Constitutional Court exposed the government’s creative accounting as illegal, blowing a €60 billion hole in his climate investment plans. The ruling sent shockwaves through Berlin. The government’s entire economic strategy collapsed. There was no money left for anything they had promised to do.
The second failure was one of leadership. His coalition united parties that were ideologically miles apart. The Social Democrats pulled left on spending. The Greens pushed hard for climate measures. The free-market liberals demanded fiscal discipline.
Such deep divisions would have required exceptional leadership to create a cohesive government. Instead, Scholz proved unable to manage basic communications, even between his coalition partners.
Like Merkel before him, Scholz rarely led but waited for the moment when decisions were made for him. For example, when Russia invaded Ukraine, he dithered for months over sending tanks until the US promised to do so as well.
The third failure was in policy execution, both in foreign and domestic policy. Germany’s strategic drift became apparent as relations with France and Poland deteriorated over everything from energy policy to Ukraine support.
Even on transatlantic relations, where Scholz maintained cordial ties with US President Joe Biden, his government failed spectacularly. During the US election campaign, his foreign ministry posted mocking comments about Donald Trump. With Trump returning to the White House, Germany finds itself diplomatically isolated from the new US administration.
The domestic situation proved equally grim. Germany’s railways barely function. Its digital infrastructure needs an upgrade. Its armed forces lack basic equipment.
To make matters worse, Germany failed to integrate a large part of the millions of refugees it accepted since Angela Merkel famously opened the borders in 2015. Scholz’s government was hapless in addressing the resulting law and order problems, including a series of Islamist terror attacks. They barely managed to start deportations of rejected asylum seekers.
By the time his coalition collapsed, Scholz’s approval ratings had fallen to the lowest ever recorded for a sitting chancellor. Now Friedrich Merz of the Christian Democrats stands poised to become Germany’s next chancellor.
Latest polls put Merz’s CDU/CSU at about 30 per cent, well ahead of Scholz’s Social Democrats at 15 per cent, the Greens at 13 per cent and the far-right Alternative for Germany (AfD) at 20 per cent.
In the recent four-way television debate, Merz dominated his opponents. He took on the AfD’s Alice Weidel over Ukraine, exposed the fiscal holes in Scholz’s record, and presented his vision for rebuilding German competitiveness. He came across as chancellor-in-waiting.
Merz has been clear about his agenda: tougher immigration policies, stronger defence commitments and economic reforms. Unlike Scholz and Merkel before him, Merz speaks plainly about Germany’s problems rather than hiding them in jargon.
His response to Weidel’s attempt to justify closer ties with Russia exemplified this directness: “No, Ms Weidel, we are not neutral. We stand with Ukraine.” It was the kind of clear moral leadership Germany has often lacked under Scholz and Merkel.
Yet Merz will not have a free hand to reset German politics. The fragmented party landscape means he will need coalition partners. The Social Democrats or Greens are the most likely options. Neither would support a complete break with past policies.
The mathematics of coalition building thus makes a partial reform the most probable outcome. Germany might get tougher policies on immigration and a more robust stance on defence. Economic and energy policies could become more pragmatic.
But the deeper rot in German governance – from its crumbling infrastructure to the country’s bureaucratic sclerosis – will require more fundamental reforms than any coalition will likely deliver.
The combination of Merkel’s 16 years of drift and Scholz’s three years of mismanagement has left problems too deep for quick fixes. That is the price Germany must pay for too many years of politics without leadership.
Scholz promised to be another Merkel. In that, at least, he succeeded.
