By HUGO ALBUQUERQUE*
Major German corporations announce cuts and layoffs as early elections could topple current government
With elections scheduled for September next year, Germany is waiting for a vote of confidence in parliament soon – which could bring forward the elections to February 2025. Recently, Finance Minister Christian Lindner, from the Liberal Democratic Party, was fired, breaking up the traffic light coalition – which united the red of the Social Democrats, the yellow of the Liberal Democrats and the green.
The budget dispute that served as a pretext for Christian Lindner's resignation, however, stems from a scenario in which the German economy is showing signs of severe crisis. The reason is that the explosion in the country's energy prices, caused by NATO's intervention against Russia in Ukraine, has exhausted Germany's powerful industry, leading to a gradual decline in economic activity. After almost three years of conflict, Germany shows little sign of how to reverse the situation.
With less economic growth, more inflation and a huge expenditure determined by economic aid to Ukraine, Berlin has little to do. Even the little pebbles in the street knew that NATO expansion into Ukraine would lead to a military crisis with Russia, undermining the advantageous trade that Berlin had with Moscow. This possibility was, in fact, yet another benefit that the English and French saw in the confrontation.
A short war, with a Western victory and a possible fall of Vladimir Putin's regime, would lead to temporary chaos, but it could bring gains for Germany – or at least not a heavy toll for the government led by Social Democrat Olaf Scholz. However, the prolonged conflict and Russia's advantage in a war of attrition have shifted the economic losses across the Black Sea.
Layoffs and cuts in big capital
The history of Unified Germany is intertwined with that of its large corporations. There is no period, whether parliamentary democracy or authoritarianism, in which German capitalism does not revolve around sectoral giants and their interplay with the State – which today subsumes trade unions and popular movements into its institutional structure. Even Nazism was not a chapter of nationalization, but of the advancement of these corporations, including in a war economy.
The latest results from German industry are described as um crash formidable. Although it is impossible to deny the role of the costs caused by the war in Ukraine, the global media seeks to promote a Sinophobic narrative: it would be the Chinese automobile industry that would destroy Volkswagen or Mercedes. In part, it is, but also because the Chinese have their energy demand assured, including by the Russians.
Passing on the cuts to the workforce, cutting subsidies for agriculture – in order to increase the supply of labor – and carrying out mass layoffs becomes the easiest path for German corporations. The Social Democratic government, with its historical ties to unions, becomes the target of local big capital. A government that will move forward with the austerity is needed.
After state elections that recently showed a precarious advance of the far right, at the federal level, however, the Christian Democrats are ahead in the polls. The Germans were persuaded to fight Russia, which was not very difficult, but that does not mean that they cannot simply blame Olaf Scholz's government for the economic disaster – and they do not always see a connection between the two.
Scholz, like Joe Biden in the United States, always sought to disguise the real costs and effects of the war – including to gain popular support in the holy war against Vladimir Putin. Of course, this was the Biden administration's holy war, but for Olaf Scholz it was a disaster that took Germany out of a comfortable situation, but which could not be avoided, under penalty of deviating from the country's constitutive commitments.
Between economic salvation and strategic subjugation to the United States – even more so under a Democratic government, which is sympathetic to the German and European establishment – it is obvious that the second option prevailed. Joe Biden, then, became a kind of suicidal Pied Piper of Hamelin, and Olaf Scholz one of the children who were hypnotized, at the end of the plot, by the magician, until they disappeared into the mountains.
A trip to the past
The Germans seem to be hoping, at first, that the old Christian democracy will restore the stagnant stability of Angela Merkel's long government. There is no shortage of those on the left who insist that things would have been different with Merkel – even though the former chancellor insists on supporting what the Olaf Scholz government did in Ukraine, trying to deny her past and claim her peacemaking role with Russia as a cover-up.
Today, however, Germany’s Christian Democrats have another leader: Friedrich Merz, a lawyer and lobbyist for the billion-dollar Black Rock investment fund, who was a right-wing challenger to Merkel for power in the Christian Democrats. Defeated and isolated by Merkel, Friedrich Merz briefly withdrew from electoral politics, but has remained a vocal critic of Merkel’s right-wing governments.
Friedrich Merz's rise to power was, however, an accident. Edmund Stoibel's chief economic advisor in 2002, he lost ground under Merkel's leadership, only returning to try to run for party leadership in the context of her retirement. He lost to Merkel's designated successor, Annegret Kramp-Karrenbauer, who would later fall into disgrace, but lost the nomination for the 2021 elections to Armin Laschet.
After the Social Democratic victory in 2021, Friedrich Merz tried and finally won the party leadership. But he would hardly want to take power in a country devoured by a war that he, likewise, accepted in a bovine manner – even if he tried to take a critical line until the first months of 2022, when Kramp-Karrenbauer was nuclear threats to Russia.
Friedrich Merz's positions are a more emphatic defense of neoliberalism and also a criticism of refugee and immigration policy. During the Merkel years, he said that his party member was weak with Donald Trump, in his first term as American president. Today, Friedrich Merz seeks an agreement with Trump. The same can be said about NATO expansion into Ukraine, which he was against until he did a 180-degree turn in early 2022.
The bet on Friedrich Merz seems to be the last gasp of the hyper-powerful German political establishment. After him, voters will tend to look more fondly at the extremes of the spectrum, be it the hard-line socialism of a Sahra Wagenknecht or the far-right Alternative for Germany (AfD, in German) – which is split in two by its two main lines.
There is no indication that Friedrich Merz will be able to save Germany, since he is unlikely to do anything outside the NATO line and, for that reason, will not be able to mend relations with the Russians. Even if Friedrich Merz tries, Russian President Vladimir Putin's commitments to his Chinese allies will make Europe the second option. In addition, this is yet another lesson in the inability of liberals and the moderate line of social democracy to face this global crisis.
* Hugo Albuquerque he is a lawyer and editor of Autonomia Literária.
Originally published on the website World Opera.
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