Olaf Scholz’s coalition prepares to take office in Germany

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THREE-AND-A-HALF years ago German politics looked exhausted. Angela Merkel had just assembled her third “grand coalition”, a tired centrist alliance that left no one satisfied. Today, two months after an election that saw Mrs Merkel’s Christian Democrats booted from office, the mood is markedly brighter. On November 24th the leaders of Germany’s Social Democrats (SPD), Greens and Free Democrats (FDP), a pro-business party, exuded optimism as they gathered in a converted Berlin warehouse to hail their new “traffic-light” coalition (named after the parties’ red, green and yellow colours). In 177 pages and 52,000 words—a shade more than “The Great Gatsby”—their three-party deal lays out a policy agenda for the next four years.

Seeking to conjure coherence from an unwieldy project, the parties are pushing a narrative of “modernising” Germany after 16 years of Mrs Merkel’s conservative rule. The notion that three disparate parties might so quickly sand away their differences looked dubious. But their leaders insisted that the two-month coalition negotiations—which proceeded relatively smoothly, on time and mostly without leaks—built a bedrock of trust. Olaf Scholz, the SPD’s taciturn chancellor-to-be, says he hopes the parties will campaign jointly at the next election. People were sceptical of traffic lights when they were introduced in Berlin in the 1920s, he noted, but they are are indispensable today.

The parties’ modernising promise finds expression in a raft of legislative proposals. These include a liberalisation of Germany’s archaic citizenship laws, streamlining of bureaucracy, electoral reform to shrink the bloated Bundestag, improvements to gay and trans rights, and the legalisation of pot. Negotiators say they struck agreement on these issues quickly. The deal’s language on other themes bears the hallmarks of trickier talks.

A commitment to keep Germany on the “path to 1.5 degrees” (ie, to limit global warming) is threaded throughout. A pledge to bring the coal phase-out forward to 2030 from 2038 is welcome though symbolic, as carbon-pricing is already killing the stuff. More significant is a planned increase in the share of renewables in Germany’s electricity mix to 80% by 2030, up from the current 65% target (and 45% today). The agreement is thinner on transportation, says Alexander Reitzenstein, a climate expert at Das Progressive Zentrum, a think-tank, and, to his surprise, offers nothing on raising the domestic carbon price.

The parties bickered over fiscal policy and public investment. A constitutional “debt brake”, strongly backed by the FDP, limits deficit spending. A raft of complex tools will be used to get around it, including beefing up the state development bank, extending debt repayments and tweaking the calculation of Germany’s structural budget deficit. Details on all this are thin, but the coalition will probably struggle to meet the Greens’ target of €50bn ($56bn) a year in fresh money. Next year this national discussion will bleed into a European one on fiscal rules, a touchy subject in Germany. Here, the deal’s vague commitment to use the rules to secure growth and foster investment in the EU offers more than some had dared hope.

“The foreign-policy chapter is stronger than I’d expected,” says Jana Puglierin of the European Council on Foreign Relations. A vow to attend the first meeting next year of signatories to a new anti-nuclear weapons treaty will worry NATO allies. But it is balanced by a strong commitment to NATO’s nuclear-sharing arrangements, under which Germany consents to host American nukes and maintain aircraft that can deliver them. The Russia talks were especially contentious, and the coalition agreement ducks explicit mention of Nord Stream 2, a Russian gas pipeline detested in America and much of Europe. But Germany’s China hawks are delighted with the deal’s robust language, including support for Taiwan’s involvement in international organisations. Mrs Merkel’s engagement-first approach to China looks set to expire with her chancellorship.

The agreement is weaker on reforms to Germany’s pension system, which faces chronic pressure from an ageing population. Easing restrictions on labour immigration from outside the EU is welcome but cannot plug the demographic gap. On asylum the new government offers carrot (easier family-reunification rules) and stick (quicker deportations). Yet for a country squat in Europe’s middle, national policies can only do so much in the absence of a deal to bolster the EU’s common asylum rules. A fresh migrant crisis on Europe’s borders could strain the traffic-light government as it did Mrs Merkel’s.

Many of the 17 ministerial posts still need to be divvied up, but the most important are already known. One crucial relationship will be between Christian Lindner, the FDP leader and Mr Scholz’s presumed finance minister, and Robert Habeck, the Green co-chair, who will run a beefed-up climate and economy ministry (Annalena Baerbock, the Greens’ other leader, will be Germany’s first female foreign minister). The tax-cutting liberal and the statist Green claim to be united in the mission of managing Germany’s energy transition. Reality will test that promise.

Yet unforeseen events will prove the biggest challenge. In that sense, the pandemic once again raging inside Germany offers the traffic-light coalition a grimly fitting welcome. Mr Scholz’s government will be sworn in during the week of December 6th. By then, with thousands of Germans dying from covid-19 every week, many hospitals will be under severe strain. The new chancellor is already contending with demands for another national lockdown and an Austria-style vaccination mandate. The wedding went as well as can be expected. But the honeymoon will be brief.