A German Marxist Coalition Government New Taxes Set To Expropriate Wealth From Citizens. SHTF.tv

In terms of scenery, the Siegerland isn’t a very attractive place. The ravines here are narrow, the spruce forest full of bare patches. But economically, the industrial parks to the right and left of the highway are among the most valuable Germany has to offer. Ironworks, steel refiners and mechanical engineering companies are located here, as are plants belonging to large corporations and small to medium-size companies (SMEs) with global operations. Hidden champions like the Coatinc Group. With its approximately 1,500 employees, the company specializes in the galvanizing of steel parts.

Money doesn’t smell, but industry often does. A rank odor fills the factory floor. Mighty steel beams are cleaned in a scalding tank and then dipped into a zinc bath by a crane. The process protects them from rust for the next 50 years.

Much of the company’s business comes from these huge parts, made in Germany. Construction companies usually order the beams two years in advance and Coatinc is still busy working off its backlog of orders. But Managing Director Philippe Dupont gets nervous when he thinks about the future. All the key indicators in the construction industry are currently pointing to a downturn. “Building permits, contracts, awards in bidding processes,” Dupont says. And what that means is “as easy to work out as two plus two.” He expects that there will soon be a shortage of large orders.

The company, family owned since 1502, has experienced many crises in the past: wars, hyperinflation and familial strife. Somehow, they’ve always found a way to get back on track.

But this time could be different, says Paul Niederstein, who runs the company together with Dupont and, as a descendant of the founders, holds the majority of the company’s shares. It’s not only the Ukraine war and the increasingly sharp rhetoric between the United States and China, the superpowers of globalization, that worries him. “At the same time, we are also faced with the task of switching to a CO2-free mode of production.” It is the undertaking of the century for the entire business community – and Niederstein needs the government’s support.

But instead of helping the companies, he says, Germany’s current coalition government is creating competitive disadvantages with its misguided energy policies. He says Berlin is constantly coming up with new regulations covering everything from supply chain laws to waste disposal documentation. “We need wiggle room to find solutions for the future,” Niederstein says. Instead: “Everything seems to be frozen in Germany.”

In recent days, the German government has been at pains to give the impression that it has recognized the gravity of the situation. At meeting last week, the coalition agreed on tax breaks for SMEs and offered the prospect of a law to reduce bureaucracy. But not even experts close to the government believe that it will succeed in helping to spread a mood of confidence among companies. Achim Truger, a member of the German Council of Economic Experts, which advises the government, says the decisions made at the meeting lack “investment oomph.” The verdict of many experts is that it is too little, too late.

Twenty years after Chancellor Gerhard Schröder’s expansive Agenda 2010 reforms, many believe Germany is once again in need of significant structural change. For this year and next, the International Monetary Fund is expecting German economic growth of 0.5 percent at best. This leaves Germany at the bottom of the list, behind competitor nations like the United States, Japan, France and Canada.

The country, which has been spoiled by success and grew comfortable in its role as Europe’s economic engine, now finds itself experiencing a sudden slump. Indeed, Germany is the only country in Europe that hasn’t been able to find its way back to the growth experienced in 2019, the year before the coronavirus pandemic struck. The economy is stagnating for the third quarter in a row, and more bad news seems to come in on an almost daily basis. German automakers produced almost 40 percent fewer vehicles in 2022 than they did 10 years ago. “Deindustrialization  has begun,” says Matthias Zachert, head of the chemical giant Lanxess, which is in the process of closing two plants in the city of Krefeld near Düsseldorf.

The German Association of Small and Medium-Sized Enterprises (BVMW) is reporting that almost one in five member companies is considering relocating at least some elements of production to sites abroad. Meanwhile, the chemical industry is warning of an industry exodus due to high energy prices. And a study commissioned by the Berlin-based think tank Dezernat Zukunft concludes: If the government doesn’t do anything about the foreseeable high energy prices, the exodus of companies will cost Germany up to 120 billion euros in economic output – and 1.3 million jobs.

London’s Economist already dubbed Germany the “Sick man of Europe” at the turn of the century. A few weeks ago, the magazine highlighted  a green Berlin traffic light man on its cover with an IV attached to his arm. The headline: “Is Germany once again the sick man of Europe?”

Until recently, many Germans thought the country had glided through the coronavirus pandemic and energy crisis with very little harm done. Now, in the wake of the latest warning signs and frightening numbers, they feel as if they have woken up in a different country: one that is slowing down, disconnected and paralyzed.

It may look like a crash, but it is the product of a slow descent. The German states and the federal government became so accustomed to economic prowess, especially in the export industries, that it seemed like it could never change. Economists called for reforms, pointed out the inadequate infrastructure, the housing shortage and the embarrassing lack of digitization when compared to international standards. But not much happened. For many years, the overall positive economic situation concealed what was actually going awry. So far, the crisis has barely been felt on the labor market, which is both a blessing and a curse. Because of the lack of pressure, there is very little courage to make the major and painful reforms that many believe are necessary.

The Germans are “afraid of change,” says Moritz Schularick, the recently appointed president of the Kiel Institute for the World Economy. The economist expects that the pressure on policymakers will likely have to increase before any action is taken. “Whether the country has to first experience another year or two of poor growth rates or a major automotive company has to go out of business first before something happens, I don’t know. But we’re heading in that direction.”

Schularick’s predecessor Gabriel Felbermayr draws a painful comparison: “The truth is that the situation in Germany now is similar to that in Italy, Spain or Greece 15 years ago, but no one wants to hear that.”

Germany’s prosperity is threatened, and – given the overall picture diagnosed by the experts – it is unlikely there will be any quick cure. Economists aren’t diagnosing a slump in demand resulting from economic malaise, nor do they see the kind of sudden collapse like that witnessed during the recent pandemic. Instead, they argue that Germany is experiencing a developing supply crisis, a weakness in the productive core of the economy. It’s a disease that can’t be cured with aid or stimulus programs. It can only be fixed through far-reaching reforms.

The problem, according to Frankfurt-based economic historian Werner Plumpe, is that the German “capacity for self-correction” has apparently fallen victim to “political confrontation.” He argues that, in addition to a mixture of grumpiness and arrogance that characterized the final years of Merkel, there is now a “self-blockade” mentality in which some politicians take refuge in “wishful thinking.” Politicians like Chancellor Olaf Scholz, who as recently as March, despite all the facts and indicators, promised an imminent “economic miracle.” Or his Deputy Chancellor Robert Habeck of the Green Party, for whom climate and economic policy are still one and the same.

Entrepreneurs, on the other hand, are daily experiencing the contradictions and obstacles of an economic policy that has been misguided for years. They are desperately looking for skilled workers, even as their best people take advantage of early retirement. Or the local building authority derails an investment project that Berlin politicians had encouraged them to undertake. Or they hear that the Green Party economy minister is promising them relief on electricity prices, just as they learn that the finance minister, a member of the liberal Free Democratic Party, rejects the plan that very same day.

How did Germany allow itself to slip this badly? And what needs to happen to get the country back on track?

Energy Policy
How a decade of idleness has imperiled German competitiveness

When Philipp Kessler last year purchased a new production facility in the eastern German state of Brandenburg for his startup Turn2X, the founder was still optimistic about the prospects of turning Germany’s transition to renewable energies into a successful business. Turn2X produces hydrogen with the help of green electricity.

CO2, from biogas plants, for example, is then added, producing methane in a patented technology – methane that can then be fed into the grid like ordinary natural gas. You’d think that Germany could benefit from such climate-friendly natural gas that sinks emissions while helping secure the country’s supply without having to build new grids.

But the plant remains a pilot project with a limited capacity, enough only to supply a few hundred households with gas for heatng. Kessler is planning to expand abroad. “Starting in October, we will dismantle the plant and rebuild it in Spain next year,” he says. “The key argument is cheap renewable energy in Southern Europe.”

Kessler says he would have liked to produce the green gas in Germany, but electricity prices in this country are simply too high to make the conversion to methane viable. “In Spain, we can link production directly to solar or wind farms and purchase electricity for less than five cents per kilowatt hour,” Kessler says. It would, he says, cost a lot more expensive in Germany.

Kessler’s decision shines a spotlight on the energy problem at the heart of the German economy. The fact that a growing number of companies no longer see their future in Germany has to do with the Ukraine war, which has cut the country off from cheap gas from Russia. But it is also the product of a lackadaisical energy police in recent years that promised Germans the switch to climate-neutral clean energies while only half-heartedly taking the steps to make it possible.

Nothing illustrates the country’s misguided energy policy better than the “solar cap” introduced by Peter Altmaier, then minister of the environment, around 10 years ago. Because the expansion of the country’s power grid wasn’t progressing, the Christian Democrat slashed subsidies for photovoltaic systems. “No one can have an interest in us installing solar rooftops but not being able to use the electricity,” he said at the time.

Later, fellow conservative Horst Seehofer, of the conservative Christian Social Union – governor of Bavaria at the time – posed in his constituency in front of a poster protesting the planned power line that would bring wind power from Northern Germany to the south, a vital infrastructure project for Germany’s shift to renewable energies. Seehofer said he would “pull out all the stops” to prevent the construction of the network, a masterclass in NIMBY-ology.

This kind of thing happened over and over again during the Merkel era. There seemed to be more warnings about wind turbines and high-voltage power lines ruining the landscape than about the climate catastrophe. Rules governing the distance between homes and wind turbines were created while laws aimed at speeding up the construction of offshore wind farms have been delayed. Even as smart meters have been installed across the board in other EU countries, Germany has repeatedly delayed the introduction of digital services with data protection regulations and technical requirements.

As a result, of the nearly 14,000 kilometers of new power lines that the country needs, according to the government’s own Federal Network Agency, only around 1,900 kilometers have been built to date. And because the inadequate existing lines are overloaded, as absurd as it sounds, wind turbines in the north often have to be disconnected from the grid. Valuable electricity is lost. Nevertheless, the plant operators receive billions of euros in compensation for the electricity that goes unused. In addition, there are high taxes and levies for electricity.

Economy Minister Habeck now wants to make up for the failures of past energy policies by resolutely expanding wind and solar power. But his laws are still one thing above all: ambitious plans. In many cases, the approval authorities in the federal states are still working “slowly and tediously,” says Wolfram Axthelm, managing director of the German Wind Energy Association. He says there is also a backlog in applications for the transport of wind turbine parts.

Expansion is therefore far behind schedule. According to the Fachagentur Windenergie an Land, a lobby group that promotes wind energy, new turbines with an output of just under 2 gigawatts have been installed so far this year. According to Habeck’s plans, there should actually be 5 gigawatts in place by the end of this year.

Because the expansion of renewables hasn’t gained sufficient momentum, electricity prices are still higher than they were before Russia’s attack on Ukraine. More importantly, they are far above the level of competing industrialized countries like the U.S., China and France. This means that the basic materials industry, 95 percent of whose products are further processed, is therefore hardly competitive in Germany.

Against that backdrop, industry representatives have been pleading with the federal government in Berlin for months to provide relief. Last week, the governors of seven German states, in which the energy-intensive chemical industry is strongly represented, sent a letter to the German government in the run-up to its recent meeting. “Without decisive countermeasures, there is an acute risk of production, and thus jobs, being relocated to lower-cost locations abroad,” they wrote.

The government’s electricity price brake, which caps costs for medium and large industrial customers at 13 centers per kilowatt hour, is still in effect until the end of the year, and an extension until April is conceivable. But what happens after that? That is currently the focus of significant debate within the government. Habeck of the Greens together with the SPD would like to introduce a state-subsidized industrial electricity price of four to six cents per kilowatt hour for the largest industrial energy consumers. The difference to the market price would be covered by the state. But Finance Minister Lindner and Chancellor Scholz oppose the idea.

Economist Manuel Frondel of the Leibniz Institute for Economic Research (RWI) instead recommends that the electricity tax for all business be reduced by two cents – to an EU-wide minimum of 0.05 cents. Some economists reject a temporary electricity price subsidy of the electricity price, if only because the don’t believe Germany will be able to install enough wind turbines to produce sufficient green electricity in the coming years. They argue that the supposed “bridge electricity price” would be a bridge to nowhere, that the money would once again conceal problems rather than solve them.

The Federation of German Industries (BDI) has little sympathy for “the government parading its disagreements in public,” as Holger Lösch, BDI’s deputy chief executive says critically. He’s calling for an “overall package” that bundles all relief ideas to the extent possible.

For years, German politicians were able to concentrate on distributing the billions that a booming economy was pouring into their coffers. Now that the economy is not doing quite as well, some parties in the coalition government are balking at the idea of spending money to get the economy going again. Higher public spending is a taboo for the business-friendly Free Democrats, for example. Cutting social budgets, on the other hand, is out of the question for the Social Democrats and the Greens.

This is also the legacy of the trauma the two parties carry with them from the dramatic reforms carried out under then-Chancellor Gerhard Schröder, head of a coalition government pairing his SPD with the Greens, as part of the Agenda 2010 package. The painful labor market reforms of those years did indeed get the economy moving. But they also cost Chancellor Schröder his office, split the SPD and kept both the Social Democrats and the Green Party out of government for years. Since the, the take home lesson for both parties has been: Reforms are a losing issue.

This helps to explain why Schröder’s successor Scholz rejects anything that sounds like an imposition on voters, particularly seniors. But that doesn’t make things any better.

A Lack of Skilled Workers
How the reform trauma of the Schröder era weakened the labor market

Germany will lose more than 7 million workers in the next 12 years as the Baby Boomers move into the retirement age. If the gap isn’t closed, then the shortage of workers, which already affects almost every second company, will worsen. According to estimates by Germany’s Chambers of Industry and Commerce, the problem is costing the German economy almost 100 billion euros in economic output. Important future-oriented projects like the transition to the carbon-neutral era cannot be achieved without enough engineers, electrical technicians and welders.

That has been known for years, but those in power don’t seem to like hearing it. Does Germany need to become a nation of immigrants? It’s a notion that many on the conservative spectrum in Germany, including the center-right Christian Democratic Union and its Bavarian sister party, the Christian Social Union, aren’t fond of hearing. And what level of security does the government want to promise for pensions? Does coalition government want to set a guaranteed pension level of 48 percent for the foreseeable future. And will it seek to increase the age of the statutory working life, beyond the current retirement age of 67? Scholz has ruled out that possibility.

Those in power in recent years preferred to cling to their illusion of prosperity and passed one spending bill after the other. The CDU and CSU pushed through a pension package aimed at bolstering the retirement years of women who took time off work to have children. The SPD, meanwhile, was allowed to introduce the “pension at 63” without deductions for its disgruntled trade union clientele. People in physically demanding professions such as roofers, they argued, could not be expected to continue working until they were age 67. Oddly enough, it was Andrea Nahles who pushed through the regulations as Germany’s social affairs minister. And today it is she, as the head of the Federal Employment Agency, who is complaining about the shortage of skilled workers.

The law came into force in mid-2014. Last year alone, 262,000 people applied for early retirement without penalties. But it wasn’t even the much-touted roofers who were drawn to the model. In the construction industry, very few employees reach the required 45 years of making insurance payments. Instead, the early retirement without penalties was used primarily by comparatively well-protected and healthy industrial workers. In other worse, precisely those skilled workers who are so urgently needed at the moment.

“Retirement at 63 was a real step backward,” says Martin Werding, a professor of social policy at the Ruhr University in Bochum and one of the federal government’s five expert economic advisers. In the future, he proposes, only longtime low-wage workers should be eligible for the benefit in order to keep highly skilled workers on the job longer.

“Some 2.4 million workers could be gained by 2035 alone, if the labor force participation rates of people in their sixties were as high as those of people just five years younger,” says Enzo Webter of the Institute for Employment Research (IAB). A considerable part of the demographically induced decline in the workforce could be offset in this way.

However, the labor force participation of seniors can only be increased slowly. Setting a higher retirement age seems out of the question. The German government is instead focusing on increasing immigration from abroad.

The problem there, according to the Organization for Economic Cooperation and Development (OECD), is that Germany isn’t necessarily considered a dream destination among the world’s migrant workers, to say the least. Only 40,000 people from countries outside the EU moved to Germany to work in 2021. According to the IAB, that figure should be 10 times higher.

“Especially in relevant countries outside the EU, networks need to be established, ideally through those who have already been to Germany and can pass on experience, language and skills,” says IAB economist Weber. In addition, he says, comprehensive structures are needed to ensure that immigrants can learn German quickly and are properly deployed.

The reality in the country, however, is not even close to that ideal. The government has finally introduced an immigration points system that allows people who want to work to enter the country even if they don’t yet have a concrete job offer. However, the immigration authorities in Germany are still overburdened, and visa offices abroad tend to turn away applicants. Instead of radically cleaning up the bureaucracy, the reformed law creates even more checks for people who want to come.

That’s why Ingo Wortmann is concerned when he looks to the future. The head of Munich’s public transport authority (MVV) will have to hire one hundred new bus and streetcar drivers each year until 2030 to replace older workers who are retiring. Until recently, his recruiting was focused largely on Spain. Now, he is looking even further afield, to Africa.

The only problem is that the German authorities often don’t issue visas to immigrants even though they are willing to work, because they don’t speak German well enough – at least according to Wortmann’s experience. “But it’s not as though they need to be selling tickets or talking to guests,” he says. “I’d be happy just to have someone driving the bus.”

If we do not succeed in making it easier for people willing to work to find their way in Germany, “we will have no choice but to limit our services,” he says. Wortmann sees more than just a problem for the transportation industry. If buses and trains don’t work, people switch to their own cars, get stuck in traffic jams in the morning, clog up the infrastructure and ultimately reduce the quality of life across the country.

This wouldn’t only be bad news for efforts to slow or stop climate change. “If the transportation industry is suffering, the country is suffering,” Wortmann says. He argues that reliable public transportation is critical for the German economy – and he is convinced that Germany’s workforce problem cannot be solved “unless all government agencies pull together.”

A Bureaucratic Mess
Why the government can’t cut the red tape

One problem the German state has to solve is one of its own creation: rampant bureaucracy. Several surveys show that companies feel slowed down by nothing so much as by inefficient authorities, contradictory regulations, overlapping approval procedures and complicated disclosure and reporting requirements.

It takes more than 120 days to start a new company in Germany, compared to just 40 in Italy or Greece.

The cumbersome official apparatus isn’t usually a major obstacle to business as long as companies are concentrating on their foreign business. But since exports have weekend and climate change is requiring major investments at home, the administrative hurdles have become all the more noticeable. One figure illustrates the problem quite clearly: Thirty percent of all chemical companies in Germany say they are experiencing business headwinds abroad, according to the relevant industry association, delivery problem being chief among the challenges they are facing. But fully 60 percent of the companies say that costly bureaucracy is weighing on them.

Administrative malaise has long been a problem in Germany. There has not been a single coalition government in the country that has not vowed to curb bureaucracy – and yet all have failed miserably to do so. Few know this better than economist Johannes Ludewig, who has worked as a senior official in the Chancellery and in the Economics Ministry. He previously served as the chairman of German national railway Deutsche Bahn and as former Chancellor Helmut Kohl’s commissioner for the economic recovery of the former eastern states. So it was only natural for Angela Merkel to appoint him as chairman of the newly created National Regulatory Control Council (NKK), an independent advisory body in German that focuses on regulatory policy and the reduction of bureaucracy. The task of the 10-member body was to reduce the annual bureaucratic burden on business by at least 50 billion euros.

In the beginning, Ludewig and his team actually made some headway. Following the example of the Netherlands, they introduced a new procedure for more accurately quantifying the consequential costs of legislation. They were involved in several bureaucracy reduction laws that cut disclosure and reporting requirements by a quarter.

But the fight against administrative red tape is of little use if new regulations are constantly being added. And so Ludewig’s committee often began interfering during the formulation of new laws, an approach that did not make the NKK any more popular. “Of course, departments instinctively resist when their regulatory power is to be limited,” says Ludewig.

What followed were numerous petty wars within the government that often ended with the relevant ministry emerging victorious. One example in particular still stands out in Ludewig’s mind: the introduction of Germany’s first-ever minimum wage – or, more precisely, the bureaucracy associated with it.

When then-Labor Minister Andrea Nahles wanted to require companies in 2014 to compile extensive lists of their employees’ working hours for her new law, Ludewig warned of the high costs it would create. Nahles, on the other hand, estimated the costs to business would be not much more than 250,000 euros. It wasn’t until months later, when the law had long since been passed, that she admitted that the costs of creating and storing the mountains of paperwork had actually amounted to several billion euros.

Actually, Ludewig says, senior levels of government should have put a stop to many of the misguided amendments. But there had been a lack of courage to do so. “I have never seen a law fail in recent years because of its high bureaucratic costs,” he says.

Ludwig also believes the Chancellery should have made the digitization of government agencies a top priority. Instead, Merkel endeavored to push the thankless topic as far away from herself as possible.

In 2017, the government did write into law that the top 575 public services should be digitized by 2022. The project, though, turned into a debacle, even though several billion euros were earmarked for it. When it became clear that the target would be missed by miles, a decision was made to accelerate 35 of the projects.

But as the Federal Audit Office recently criticized, they even missed the minimum goal. Of the 35 digital initiatives selected, only three were available nationwide, and the spending associated “for the most part had no effect.”

Like his predecessor, Chancellor Scholz also wants to have as little as possible to do with the losing topic of digitization. He ceded responsibility for the issue to Transport Minister Volker Wissing of the FDP back when the current government was being formed. The post had once been at the senior, state minister level, under Merkel’s Chancellery, but that position has since been eliminated, and further modernization tasks have been moved back to the Interior Ministry. To observers, it is a clear signal that, despite all of Scholz’s assertions that Germany needs to pick up the pace, streamlining the administration doesn’t seem to be a key priority of his.

And even those limited ambitions seem to have waned a bit recently. In May, his cabinet adopted new targets for administrative modernization, according to which 15 particularly important services are now to be fully available digitally nationwide – this time by the end of 2024. These include building permits or faster vehicle registrations for major customers, such as car dealerships or company car fleets. Still, the promise made by the government to the business community is that, in five years at the latest, all administrative services for companies are also to be offered exclusively electronically.

This time for real.

The business community, for its part, has had enough. The president of the digital association Bitkom, Ralf Wintergerst, recently spoke of Germany as a failed state in terms of digitizing administration. The fact that the authorities in large parts still function as analogously as they did in the last century not only damages Germany’s image abroad. It is also extremely costly for German business.

In a study conducted on behalf of the German Engineering Federation VDMA, the Institute for SME Research used the example of a small company at the end of last year. It found that the company had to spend 3.2 percent of its revenues to comply with all the bureaucratic obligations applicable in Germany. In one specific case: around 700,000 euros – the equivalent of 10 full-time employees.

For a larger company with revenues of just under 240 million euros, the bureaucratic costs were 1 percent, or just under 2.5 million euros a year, which corresponded to the personnel costs for 40 full-time employees. According to the authors of the study, digitization of administration offers enormous savings potential for companies.

The outmoded administration practiced in Germany drives many entrepreneurs to the point of despair. One of those is Andreas Jäger, head of a large rubber manufacturer in Hanover with 1,300 employees.

Solar modules glitter as far as the eye can see from the roof of his company’s headquarters. The setup required an investment of 1 million euros and has a half a megawatt of installed capacity. It produced enough power so that the employees, who work here in three shifts operating vast rubber machines, can work as climate-neutrally as possible.

The problem is that a public road runs between company’s administrative headquarters and the production hall. If he wanted to lay a power cable underneath, he would have to register it as a utility, Jäger says. Otherwise, he is unable to get a permit. No one can explain why, but it’s German law.

At his sites abroad, in the United States, Canada, the Netherlands and even in Poland, this isn’t a problem, the entrepreneur says. But in Germany, he says, over-regulation has become “suffocating.” Attempts are being made to control and regulate everything at an increasingly granular level.

Jäger says that many entrepreneurs are now cultivating “an I-don’t-care mentality. Because they have no idea what the people in charge really want. And you can’t do anything about it at our level.” He says he is “seriously concerned that Germany” is falling behind as an attractive place to do business.

Residential Construction
Demoralized builders, exploding costs

Those wanting to build a new structure in Germany have to wade through regulation after regulation, says Jan O. Schulz, co-owner of a freelance architectural firm in Kiel.

He says he was still able to complete projects in manageable timeframes and at a reasonable cost as recently as the early 2010s. But that was long ago, he says. According to the Federal Chamber of German Architects, around 3,500 standards and regulations must be adhered to in residential construction alone.

When renovating a housing development with historic landmark status recently, Schulz had to build part of the ceiling to current codes, which resulted in no additional safety but 60 percent higher costs. One of his colleagues had already finished planning the conversion of an administrative building, but then he had to start all over again because a new code for escape routes required stairs that were twenty centimeters wider.

Meanwhile, one municipality recently wanted to force Schulz to build a playground area of at least two square meters for every 25 square meters of living space in a neighborhood with 155 residential units. The meadow next door where boys and girls loved to play? Not good enough for the authorities.

Schulz describes it as a “system of rigid specifications and standards” that the industry is forced to follow strictly out of fear of lawsuits. He says that government offices meticulously seek out errors, and everyone wants to cover their butts. “That demoralizes a lot of builders, drags things out unnecessarily and causes costs to skyrocket,” Schulz says.

It’s also a factor in the current reality that fewer and fewer new apartments are being planned. The latest figures are disastrous: In the first half of the year, building permits dropped by 27 percent compared to the previous year. German Construction Minister Klara Geywitz of the center-left Social Democratic Party has conceded that the federal government coalition will miss its target of 400,000 new homes annually.

According to a study by the trade union-affiliated Macroeconomic Policy Institute (IMK), next year, the number of new units could come close to returning to the historic low of 2009, with just 177,000 new-builds. It’s a debacle. Because of the recent refugees from Ukraine, the demand is now closer to 600,000 new apartments per year, experts estimate.

Last October, Geywitz presented a catalog of measures together with Chancellor Scholz: Her agency had drawn up an impressive 187 projects with 35 “alliance partners” to finally simplify construction. But things never really got off the ground.

Many measures are bogged down by mere declarations of intent or minutiae. When asked in a spring interview what had become of the alliance, Geywitz replied tersely: “We’re still working on it.” For the time being, however, Geywitz does not want to move forward with a tightening of new construction regulations planned for early 2025 as part of the agreement to form the coalition government. Now is “not the time for that,” the minister says.

And what about doing something to boost the economy? That is a task for which the coalition government isn’t prepared. When Russian President Vladimir Putin cut off supplies of natural gas to the Germans, Berlin should have tapped all domestic energy reserves and restricted consumption. But the FDP and the Greens weren’t prepared to do so. They preferred to cling to the dogmas that have long been cultivated within their ranks. Habeck’s Greens insisted on shutting down Germany’s last nuclear power plants. Lindner’s FDP, meanwhile, opposed setting a speed limit on autobahns, as many other parties, particularly the Greens, have called for.

So far, the current German government has primarily sought to maintain the status quo, just as Merkel did in her final years in office. Is the social security system running out of money? The government is currently in the process of cementing the guarantee for the minimum level of pensions. And are politicians not worried that too many older people are leaving the labor market? The current government is defending the right of people to go into early retirement without penalties. And is the government not concerned that many women are caught in the trap of part-time jobs? Instead, it is supporting programs that promote them. And what about Germany’s plans for the biggest transformation in industrial history, the switch to clean energies? Lindner of the FDP and Chancellor Scholz of the SPD both believe that the most important thing for Germany right now is to not incur new debt spending.

The warning signs are everywhere, and yet Germany’s leaders are sending the message that it is possible to live quite well despite a stalling economy. As they did last week at their retreat. Chancellor Scholz and his two vice-chancellors stepped outside the doors of the stately Baroque manor house at Meseberg in almost perfect step. And what about the disputes within the parties in the government coalition? Nothing more than “banging and hammering,” as Scholz put it, because they have been working hard. And the government’s poor showing in the polls? It’s not deserved, at least measured against the “good performance” shown by the government, the chancellor said, offering praise that can be heard from few others right now.

And what about the economic crisis everyone is referring to?

These are “solvable challenges,” Scholz says. The coalition just held a “very, very good meeting, both in terms of atmosphere and content,” Habeck added. He says the government is currently “unified in learning.”

That’s what it sounds like when differences are plastered over with feigned harmony. For example, in the fundamental dispute over Habeck’s electricity prices for industry. For the sake of peace within the coalition, the government didn’t even touch on the sensitive issue last week. Lindner still wants to prevent it at all costs because the plan would cost up to 30 billion euros between now and 2030, depending on where the funding limit is set. The FDP politicians argues that only large corporations would profit, and “the bakery around the corner” would get stuck paying for it.

But Habeck disagrees. He says the money would go to businesses large and small, under two conditions: That they are energy intensive and that they face international competition. In addition, the money is to be handed out only until low-cost wind and solar plants can provide electricity. In other words, it’s a bridging measure – perhaps until 2030, according to Habeck’s plan. Or it could go on forever, as Lindner has warned.