Because of the controversy caused by the whereabouts of a 60 billion euro epidemic prevention **, Germany** fell into an unexpected fiscal crisis on November 20, and the Federal Ministry of Finance froze almost all future fiscal spending plans. Foreign media described the chaos in Germany as "vividly and vividly".
The European Commission and the International Monetary Organization have said that Germany may become the only country in recession among the EU's major economies this year. In the face of various internal and external challenges, how will this round of fiscal crisis affect the political stability in Germany?Will Sino-German economic and trade relations be affected again?
On January 25, Tongji University and Social Sciences Academic Press jointly released the German Blue Book: Report on German Development (2023). During the visit, Professor Zheng Chunrong, editor-in-chief of the Blue Book and director of the Center for German Studies at Tongji University, was interviewed by Observer.com on the above issues.
Interview with Observer.com Guo Han].
Observer.com: Recently, the German Federal Constitutional Court issued a ruling on the use of 60 billion euros for epidemic prevention, which led to the freezing of all new fiscal spending plans in Germany, which has attracted a lot of attention. How do you assess the impact of this incident on German domestic politics?
Zheng Chunrong: I think this is a very serious incident. The pandemic** was set up before the pandemic and emergency loans could be authorized. Now that the epidemic has passed, Germany's three-party coalition is using its brains to invest the remaining authorized loans in the climate transition, mainly investing in areas related to the green transition, such as building renovation, green investment subsidies, and so on. Germany** had already budgeted for it, and some investments had already been initiated. There is still a part that has not been launched, but it is also planned.
Now, suddenly, the 60 billion euro transfer has been ruled unconstitutional by the Federal Constitutional Court, resulting in a 60 billion funding gap in the budget of the German Union. And the three-party coalition has created a contradiction on how to fill the gap.
From the perspective of the German Green Party, they are certainly reluctant to cut funding for investments in the green transition. However, the German Liberal Democratic Party is in charge of the purse strings, and the leader of the party is the finance minister, so it is impossible to allow it to easily break the budget regulations and borrow money to repay the money. What's more, there is also a "debt brake" clause in Germany's Basic Law, which will limit the borrowing of more than a certain percentage of new debt. Now some people have started to think about amending the constitution and studying the amendment of the "debt brake" clause in the German Basic Law, but this requires the consent of a two-thirds majority in Parliament, and not only the acceptance of the three parties in the coalition, but also the support of the opposition parties. Judging by the current situation, the League will not agree unless the situation changes subsequently. Everyone felt that there was no way to do it during the discussion, and with the guidance of **, it is not excluded that some political parties will make certain policy concessions.
As a result, we have seen that the people of the three political parties and some ministries and commissions are jumping to their feet, and their internal differences and contradictions have been fully exposed.
Finance Minister Lindner (left, FDP leader) and Deputy Prime Minister and Economy Minister Habeck (right, Green Party chairman) are at odds over how to fill the budget gap
The 60 billion euros is still very important, because the current economic situation in Germany is not optimistic, and it will fall into recession this year. It is expected that next year it may grow by only a few percent. The external crisis is still dragging on, and the energy problem has not been completely resolved. So the gap of 60 billion euros may not be filled. The only way to do that is to axe some of the important projects, but the Greens are certainly not happy.
The FDP's share of the vote in the recent state parliamentary elections, including at the federal level, has not been encouraging. They are also unwilling to budge. Therefore, when Germany reports this news, it is speculating whether it will lead to the early disintegration of the three-party coalition. The grassroots representatives of the Liberal Democratic Party (LDP) believe that since the support rate is so low, why should we join the coalition?Of course, the top echelons of the Liberal Democratic Party may have some scruples, and they are worried that if they withdraw from the ruling coalition now, then the responsibility for the early disintegration will fall on the head of the Liberal Democratic Party, which will affect the subsequent election results, and may even lead to the Liberal Democratic Party not even being able to enter the Bundestag in the follow-up. Therefore, against the backdrop of the current economic situation and the many contradictions within the three parties, this event will constitute a stress test for the future of the German coalition.
Observer.com: The International Monetary Organization**, based on nominal GDP statistics, Germany's economic aggregate will surpass Japan this year and become the world's third largest economy. But many Germans are not feeling optimistic about the economic situation. Can you talk about the underlying reasons for the bleak outlook for the German economy?
Zheng Chunrong: The current challenges facing the German economy are multifaceted. The first is the overall impact of the Russia-Ukraine conflict, which has led to an increase in Germany's energy **, production costs for enterprises, and a decline in international competitiveness. The Russia-Ukraine conflict has also changed the international economic environment facing Germany, and there has not been the rapid economic recovery that everyone expects after the end of the epidemic, and many international ** chains have not fully recovered. The recovery of the global economy is not promising, which is very bad for export-oriented countries like Germany.
In addition, Germany has also been affected by certain external influences, such as the "Inflation Reduction Act" or the "CHIPS Act" introduced by the United States, etc., all to attract investment from other countries. This is actually a headache for European countries, because some European manufacturing companies will be attracted to invest in the United States, which will also make the German and European economies worse.
Against this backdrop, let's look at the deeper reasons why the Economist article would describe Germany as "the 'sick man of Europe' has returned".
The first time Germany was said to be the "sick man of Europe", the background was that Germany was seriously backward in the structural transformation of its economy. In fact, up to now, I think that Germany's industrial structure transformation is still lagging behind, especially in the green industry and digital fields. Although Germany has been promoting in recent years, it is not enough, and German companies may have a traditional development inertia. He feels that if he has an advantageous industry, he will not have the motivation to innovate.
Observer.com: What do you think of the game between Germany and the business community after the "China strategy" of the German Union proposed to "de-risk"?Will pragmatic considerations at the economic level prevail over political logic?
Zheng Chunrong: This "de-risking" depends on how to understand it. It can be said that we will measure the benefits and risks in everything we do, which is an essential step before making decisions. From a corporate perspective, he feels that he has already weighed the benefits and risks before investing in China. He came to China because he could make money, and he is optimistic about the Chinese market and has "de-risked".
But in the eyes of politicians, the logic is different. He thinks you may only see short-term benefits and not long-term risks. They certainly recognize the importance of Sino-German relations with China and Europe. But they worry that if something goes wrong in the relationship, it could expose Europe's over-reliance on China.
In November 2023, in the German Bundestag, the distribution of the support of the SPD (red), the Green Party (green) and the FDP (yellow) Screenshot: politicoeu
Therefore, the logic of politics and the logic of the economic world are a process of mutual game. The result of the first round of the game is that at least the German political class has not been able to carry out the "de-risking" as it envisions. Because Germany is a social market economy, it means that it can only determine the framework for market behavior, and cannot intervene too much in the actual investment behavior of enterprises.
For example, German Economy Minister Habeck has proposed to review the foreign investment of German companies. However, there is no such article in the "China Strategy" document issued later. The draft plan of the Ministry of Economic Affairs would have included restrictions, such as requiring that foreign investment be subject to various scrutinies. However, there was strong opposition from the German business and business circles, and in the end the German Ministry of Economics relented. The final document does not stipulate that the enterprise should directly review the foreign investment, but that this responsibility should be handed over to the enterprise first, and the enterprise must fulfill its obligations. In case it can't be done, we will not rule out ** intervention in the future.
Therefore, this is a process of continuous game, and the logic of politics may not be implemented on any occasion. It should be said that the German economic circles still have a certain influence on the political circles, and the latter need to listen to the opinions of the economic circles and take care of the interests of the other side. On this issue, I don't think it is possible for Germany to have the ability to further increase its forecast in the future. After all, as a social market economy, Germany's awareness of these issues is still deep-rooted.
In fact, Merkel has also issued an industrial strategy, originally called "National Industrial Strategy 2030". But the final version was changed to Industrial Strategy 2030, and the word "country" was removed. Because they wanted to tone down the color of state intervention in order to reduce resistance within Germany.
Observer.com: During his visit to China in April this year, France's Macron proposed that Europe should be "strategically autonomous". However, in the context of the Russia-Ukraine conflict, it is widely believed that the EU is getting further and further away from achieving strategic autonomy. What do you think is the position of the German Scholz on this issue?
Zheng Chunrong: Actually, the earliest pursuit of "strategic autonomy" started in the process of European integration, and the establishment of the EU itself was based on the consideration of strategic autonomy, although the term was not explicitly used. In 2017, Merkel visited the United States and met with then-** Trump. After returning home, Merkel said at a campaign rally that the days when we could rely on the United States are gone and that we must take our destiny into our own hands. So the term "strategic autonomy" comes from Merkel. Of course, it is aimed at the United States, that is, Germany and Europe, that the United States is no longer reliable and must rely on itself.
But then, with the intensification of the strategic competition between China and the United States, Europe, as the "middle ground" of this competition, wants to seek a breakthrough and does not want to be "squeezed" by the Sino-US game, so it has begun to pay more attention to strategic autonomy.
Within the EU, however, there are differences of opinion on this issue. France places more emphasis on strategic autonomy. In the Merkel era, Germany was also willing to offer strategic autonomy. However, with Scholz** coming to power, especially after the outbreak of the Russian-Ukrainian conflict, Germany's position on the issue of European strategic autonomy has actually regressed. Now only France is mentioning it, because Macron has made Europe's strategic autonomy the label of his administration. Germany does not have much ambition on this issue, and Germany is now increasingly dependent on the United States for security and energy. It even feels that if it emphasizes too much strategic autonomy, it may make the United States unhappy.
Compared with Britain and France, which are completely united with the United States, and France, which has always emphasized European independence, Germany is in a middle position, hoping to balance Europe's relations with the United States, and it does not have the confidence to emphasize strategic autonomy. When we look at the countries of Central and Eastern Europe, in fact, they don't talk much about Europe's strategic autonomy at all, they just feel that they have to rely on the United States. Therefore, Germany also has to balance the different voices within Europe.
At present, Germany's position is to enhance its contribution and strength in NATO as the European pillar of NATO. This is understandably in line with the U.S. security commitment to Europe. But on the other hand, it can also be understood that the European pillar of NATO has been strengthened by Germany, and this part of the force can also be pulled out of the NATO framework to act alone. Therefore, it can be understood that Europe's ability to act independently has increased with the strengthening of NATO's European pillar.
Observer.com: As for whether to continue to provide assistance to Ukraine, different voices have begun to emerge in the strategic circles of Europe and the United States. Next year is the first season in the United States, do you think public opinion in Germany may ferment to the extent of demanding a change in the current position of aid to Ukraine?
Zheng Chunrong: The German people are already very tired of the Russia-Ukraine conflict, and they all believe that they cannot provide endless assistance to Ukraine. In fact, the "aid to Ukraine and Russia" so far has not solved the problem, and has also brought a large number of refugees, causing many domestic problems such as the energy crisis. That's what the German people think, but the elites, from a politically correct point of view, can't say that. In fact, there is a big gap between the views of the two sides.
I think that at some point in time, Germany's aid policy to Ukraine will be adjusted to a certain extent. Eventually, they will have to return to the consideration of Germany's and Europe's own interests. After all, this is a conflict on Europe's doorstep, and if it continues to drag on, it will not be beneficial to the security of Germany or Europe.