Saving Private Scholz

A weekly newsletter on German politics, with news and analysis on the new government.
By MATTHEW KARNITSCHNIG

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DAS PLAYBOOK! The big news in the German capital this week was the launch of our newest edition to the POLITICO family, Berlin Playbook, which debuted on Monday. Written by veteran political correspondent Gordon Repinski and his team, you can subscribe here. For details of the launch party last night, attended by Germany’s best and brightest, see today’s edition!
No schadenfreude: If there’s one thing Olaf Scholz craves, it’s recognition. The German leader loves nothing more than a good ole “I told you so moment,” in which he gets to scold his doubters by citing the latest data point or development that confirms he’s on the right course. With his approval ratings in the proverbial privy, the German economy in a tailspin and his three-party coalition in a permanent state of crisis, the chancellor is in sore need of those moments…and ain’t finding any.  
Ukraine’s best friend: Given his domestic woes, Scholz has recently shifted his quest for self-justification to the international arena, especially to Ukraine. With Ukraine on the ropes, the chancellor has been tireless in pointing out that Germany — long criticized for not doing enough to help Ukraine in the early phase of the war — has now committed vastly more military aid than any other European nation and plans to send an additional €7 billion this year. 
Scholz’s refrain: “I very much wish — and this is something that me (sic) and some of my colleagues are lobbying for here — that similar decisions will be taken in other capital cities,” Scholz said at the Munich Security Conference, repeating what has become a familiar refrain of late.
Lies, damned lies and statistics: Parsing how much Germany has provided Ukraine versus other countries is a complicated exercise because it’s up to the donors themselves to place a valuation on the gear they send. The headline figure may also say little about the efficacy of what’s being provided. Sending a billion euros worth of unarmored transport vehicles, for example, might be less useful than €500 million worth of precision-guided missiles. 
Credibility gap: Yet even if one accepts the figures tabulated by the Kiel Institute at face value, Scholz’s braggadocio falls a bit short. 
For one: Germany is the largest country and economy in Europe and should be leading the pack. 
For another: Germany’s stance vis a vis Russia in years leading up to the war (its continued pursuit of the Nordstream pipeline and broader business ties after the annexation of Crimea, for example) signaled to Moscow there would be few consequences for an all-out invasion. 
In other words: Germany is partly to blame for Ukraine’s predicament and should have been the first to help. 
Yet it wasn’t. Who can forget the generous offer to send a few thousand helmets in the early weeks of the war? Or the incessant foot dragging on tanks and other heavy weaponry?
The main result of those delays was that Russia had more than enough time to mine the entire front line, making it vastly more difficult for Ukraine to break through once the tanks and other weapons finally did arrive. 
Age of Taurus on hold: Not that Scholz has learned from those missteps. He continues to refuse to follow the U.K. and French lead and supply Ukraine with cruise missiles. Germany’s stockpile of Taurus missiles remains off limits for the same reason Scholz wouldn’t send tanks and other arms (until he relented): He’s worried Russia might attack Germany. Why cruise missiles should tip that scale, considering everything else Germany has sent to Ukraine is anyone’s guess.   
Tone deaf: Scholz’s EU counterparts have largely turned a deaf ear to his persistent chiding. That might be because even as he’s goading them to spend more, Berlin has been zipping its purse. In Brussels, Germany has tried to trim its contributions to a €5 billion EU fund for Ukraine aid, arguing that its bilateral contributions should be taken into account, thereby justifying a reduction in its contribution. 
Penny pinching: That might be a reasonable argument were Ukraine not in the perilous position it is. At a time when Kyiv is running out of bullets, the last thing the country needs is for German bookkeepers to get involved. 
One simple reason: If Ukraine loses, Germany’s bill is going to be much, much higher than what they’re spending now. 
What would Merkel do? For all her foreign policy missteps as chancellor, it’s hard to imagine Merkel publicly upbraiding fellow European leaders for not doing enough to help Ukraine. Instead, Merkel would use her influence behind the scenes to nudge, cajole, convince — and ultimately compromise. 
Soft powerless: The reason Scholz isn’t pursuing the Merkelian approach is that he can’t; he simply lacks the gravitas to sway the rest of Europe.
Big words: Whatever ails the German economy, no one can accuse the German government of not devoting enough verbiage and ink to the problem. 
Our favorite: The Wachstumschancengesetz – the “law for the creation of economic opportunity.” Who doesn’t love economic opportunity? German politicians, apparently. 
Rewind: Germany’s economy is expected to be among the weakest in Europe with the growth rate this year forecast at just 0.2 percent, according to the latest German government estimate. High energy costs and corporate taxes, too much red tape, a shortage of skilled workers, etc. continue to weigh on output. 
What to do? Following the implosion of much of the government’s investment agenda late last year following a constitutional court decision that ruled its budget null and void, the coalition has been deliberating and debating and discussing non-stop. 
Das Problem: What they haven’t managed to do is agree on anything substantial that would move the needle. 
Case in point: The aforementioned Wachstumschancengesetz. The government originally wanted to cut taxes for small- and medium-sized businesses by about €7 billion, hoping that would give the economy a little jolt. (How that modest amount would energize a €5.5 trillion economy is another question. We’re not economists!)
Turned out, even the €7 billion in tax cuts was too controversial for some. Germany’s states, whose approval was needed in the country’s upper chamber, the Bundesrat, did not want to do without the tax revenue, so the package was cut to just €3.2 billion, with state and federal governments sharing the burden.
Insult meets injury: Now even that compromise is on its deathbed because the opposition Christian Democrats (CDU), who can block the measure in the Bundesrat, are linking their support to another favorite of ours: fuel subsidies for farmers! 
In other words, if Scholz’s coalition doesn’t agree to restore the fuel subsidies the government just cut for farmers, the CDU won’t endorse the Wachstumschancengesetz. 
Risky move: The political tactic could backfire on the CDU because they love nothing more than to complain about what they see as the coalition’s disastrous stewardship of the economy (The malaise has nothing to do with the CDU’s 16 years in power, of course). And while the tax breaks might be minor, the Wachstumschancengesetz would also include some accounting changes and write offs that would help businesses. 
Bad to worse: Meanwhile, the economic data are just getting more and more depressing. “Sentiment is terrible,” Economy Minister Robert Habeck, never one to beat around the bush, said this week after presenting the government’s annual report on the economy. “There’s no point in trying to ignore the numbers.” 
Solution? Habeck’s job, of course, would be to come up with a solution, which he has: subsidies. He wants to juice the German economy with a dose of old-style industrial policy. But the man holding the purse strings, Finance Minister Christian Lindner, will have none of it. 
Gimme a brake: The biggest obstacle to such subsidies is Germany’s famous debt brake, which the coalition already tried and failed to circumvent, as we detailed ad nauseam here in recent months. 
Fool me once: Lindner’s remedy involves his party’s preferred tool for everything that ails the world: Tax cuts. Alas, Habeck and Scholz refuse to get on board so the debate goes on and on. “We’re going to see further debate in the coming weeks and months and there’s a chance we’ll agree,” Habeck said this week. Uh huh.   
Mein Gott! Even if the economic impact of theWachstumschancengesetz is debatable, the debate around the law shows just how dysfunctional German politics has become in the age of the Ampel. Faced with what is shaping up to be the most challenging economic environment in decades, the key actors can’t even agree on a mini stimulus.
 G7: Scholz will be partaking in a meeting of G7 leaders by video conference on Saturday.
Defense: On Wednesday, Defense Minister Boris Pistorius will head to Bavaria to visit German troops at the Ostmark barracks.
Talks on the economy: On Friday, Scholz will meet with leaders of The Federation of German Industries, the Federal Association of German Employers and other business representatives.
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