In all likelihood, the outcome of Sunday’s German election will lead to a government of the centre ground between the Christian Democrats and the Social Democrats. Both parties know that the stakes are high and we hope they will be able to deliver on the many areas where radical reform is needed. In principle, both parties agree on the need to bolster European security. However, the crucial question remains: how will the extra defence spending be financed, especially as the 2% NATO spending target is now outdated and substantially more will need to be invested? Cutting spending (especially on welfare) or loosening the debt brake are the two main options and a compromise will need to be found. Therefore, it remains to be seen how quickly the Social Democrats will be ready to embrace “new” welfare state, which – to use a term of the Blair years – embodies the concept of “a hand up, not a hand out”. Meanwhile, the Christian Democrats have slowly woken up to the necessity of reforming the debt brake, which makes me confident that a future-oriented compromise can emerge.
On election night, Friedrich Merz stated that a key point of his political agenda will be to strengthen Europe (in the wider sense). A strong Europe needs an economically strong Germany and reducing bureaucracy, along with driving investment in infrastructure and education, will be of utmost importance to achieve that. To be successful on these fronts, substantial vested interests must also be overcome. In this context, we should not forget that the current malaise of the German economy is, to some extent, the result of an “unholy” alliance between past political leaders, a sometimes overly complacent and inward-looking society, and an acquiescing business sector.
For British-German relations, I am hopeful that the new German government, with its focus on strengthening Europe economically and militarily, will do more to foster positive relationships across the Channel, as all sides agree that the need for closer cooperation on the many European and geopolitical issues has never been greater.
Dr Ulrich Hoppe
Hauptgeschäftsführer
Deutsch-Britische Industrie- und Handelskammer
