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Inflation, Bankruptcies and Fears of DeclineGermany on the Brink

Inflation, a likely recession and exploding energy prices: Germany is expecting tough years ahead with diminishing prosperity, a shrinking middle class and growing inequality. This is uncharted territory for the government and society, and both are facing some difficult choices.

By David Böcking, Simon Book, Florian Diekmann, Florian Gathmann, Simon Hage, Martin Knobbe, Timo Lehmann, Peter Maxwill, Ann-Katrin Müller, Christian Reiermann, Jonas Schaible, Michael Sauga, Thomas Schulz, Christian Teevs, Gerald Traufetter und Severin Weiland

22.09.2022

Nicole Geithner’s family ought to be doing well. Really well. And the Geithners know it. Their apartment, in a historical building located near Dresden, is freshly renovated, her job as a paramedic and his as a project manager for an IT company are decently paid and secure. With a gross household income of 90,000 euros, they are firmly anchored in the middle class. They should be living pleasant lives.

But it doesn’t feel that way for the family of four. They long ago gave up their dream of owning a home, with their plan of buying a second car meeting the same fate. The trip they planned to take to Amsterdam has also been cancelled. Moreover, the Geithners have begun paying closer attention to sales and special offers at the supermarket. “I’m afraid that soon we won’t be able to afford the nice life we live,” says Nicole Geithner, 35. “We’re nervous.”DER SPIEGEL 38/2022

The article you are reading originally appeared in German in issue 38/2022 (September 17th, 2022) of DER SPIEGEL.SPIEGEL International

They’re not alone. Political leaders in Berlin are also growing uncomfortable. When the German middle class starts worrying about decline, things start getting dicey everywhere in the country. Particularly for the government.

One doesn’t have to look far for the roots of the problem: high inflation, skyrocketing energy prices and a slowing economy. Not to mention the challenges associated with tackling climate change.

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And the situation wouldn’t even improve particularly quickly if the war in Ukraine were to come to a sudden, unexpected end. On the contrary. Several different crises are coming together at the moment to form a perfect storm.

That the German economy will slide into recession this winter is no longer really a question. And there is growing evidence that it could become particularly severe – with a tenfold increase in the exchange electricity price, numerous corporate bankruptcies and a permanently damaged economy. The losses in prosperity, says economist Michael Fratzscher, will be permanent. Germany, according to the forecasts, is in decline.

Nicole Geithner’s family has increased their grocery budget by 20 percent, and their prepayments on water and general utilities for their apartment have doubled. She suspects that this is by no means the end of the story. “There’s always something on top,” Geithner says. To Geithner, it feels “like we’ve completely lost control.”

This is uncharted territory for Germany. After nearly two golden decades of rising incomes, steady economic growth and little unemployment, a tough decade is looming. At least for those who aren’t happy about paying up to 1,000 euros more a month for gas and electricity, three euros for butter and purchase prices of 1 million euros for a two-bedroom apartment. In other words, everyone but the top 10 percent of the country.

At the same time, that which has been glossed over in recent years is now coming to the fore: Growing inequality. Since the 1990s, incomes have been drifting apart, and wealth even more so. The wealthy own more and more, even as the number of low-income earners is growing. The center of society is fraying.

In good years, this could be ignored politically, because it was mainly the bottom 20 percent who suffered. As harsh as it may sound, it is a demographic that traditionally hasn’t had much of a say in the country. Today, though, it’s also about the center of society, even comparatively well-off people like the Geithners.

Just how dramatic the situation is can be seen from one of the Germans’ favorite activities: saving money. The Sparkassenverband savings banks association estimates that 60 percent of households in Germany soon will no longer be able to put money aside. Inflation and energy prices are eating up their disposable income. During the second quarter of this year, real wages fell by 4.4 percent.

A middle class family: Nicole Geithner, her partner Valentin Schulze and son Emilian Foto: Sven Döring / laif

Among the hardest hit are the up to 14 million people who are just barely clinging to the middle class and don’t want to slip any further. Families with two children and a net income of 3,000 euros per month, for example, who have had to stretch their budgets to the limit despite two full-time jobs. People, in other words, who already have their doubts about social justice in the country.

It’s a dangerous situation, and not just from an economic point of view. Thousands have taken to the streets in protest in the cities of Leipzig, Magdeburg and Pforzheim in recent weeks, and it’s possible this is only the beginning. Politicians in all camps are warning of the possibility of a “hot autumn,” some of a winter of rage, referring to possible protests and unrest. Germany’s domestic intelligence agency, the Federal Office for the Protection of the Constitution, which is tasked with monitoring extremism, has set up a working group to investigate if a movement is materializing.

The fears are justified. People who feel left behind tend to gravitate toward the political fringes. Injustice, even if only a perceived unfairness, fosters populism and extremism.

The federal government is turning to its usual practice of trying to smother the problems with money and is working on its third relief package within just a few months, this time with the aim of calming the lower middle class. The plan calls for things like a flat-rate energy price for pensioners, a flat-rate national public transportation ticket (for somewhere between 49 and 69 euros a month) and increased monthly child benefit payments for parents.

But much of it still seems half-baked. It remains an open question, for example, how exactly an electricity price cap is to be financed by skimming profits from energy utility companies. Despite the “massive” relief package, as the finance minister calls it, Chancellor Olaf Scholz is still failing to come up with a clear plan for combating the downward spiral.

Still, Germany’s leaders are at least aware that quickly fabricated cash gifts to calm the masses are not a sustainable solution in the constant fire of crises around the world. There simply isn’t enough money available given the large number of problems and increasingly precarious situation.

The prevailing world order is disintegrating, the age of globalization is coming to an end, and the German model of prosperity in particular is under massive threat as a result. The consequence is that there will be less to redistribute in the future.

At the same time, the government and taxpayers will be faced with hundreds of billions of euros in additional costs over the next several years. Industry must be transformed to become climate-neutral, and the country’s energy supply must be shored up to ensure independence from Russia. The country must be reformed, digitized and made more competitive for the increasingly tough systemic competition against autocracies like China. Traditional industries are in danger of disappearing – and with them jobs.

A luxury perfume ad: People at the bottom have fewer opportunities to work their way up. “To exaggerate just a bit: once poor, always poor – once rich, always rich.” Foto: Stefan Boness / DER SPIEGEL

The crisis is also a symptom indicating that a chaotic epoch is dawning. That many things aren’t just changing for the foreseeable future. Rather, they are structural changes, and likely for the worse.

As such, it will be necessary to renegotiate how this will affect society – who will have to give up more and who will get how much? What fairness will mean in concrete terms in the future.

Is this the beginning of a decade of redistribution that will primarily burden the upper middle class, a group that benefited the most when times were good? Or will people have to get used to the fact that the state can no longer relieve them of every burden? And how much strength and money will then be left for reforms that have long been agreed upon, so that the coming generations won’t be handed an emaciated country, but rather a modern and climate-friendly one?

These are difficult questions that could become a test for society. And even more so for a governing coalition that has highly divergent views on the definition of fairness.

I. Is Chancellor Olaf Scholz Up to the Crisis?

You can tell that nerves are frayed when the chancellor gets loud, when he almost yells. These are “serious times,” Scholz shouted in the federal parliament, the Bundestag, last week, actually clenching his fists. The cohesion of society, he said, is “of the utmost importance.” The chancellor has cultivated a standard appearance over a long period of time: cool, unemotional and stoic. When he deviates, as he did this time, it is a special moment, one that points to political unrest.

During that plenary debate in the Bundestag last week, Scholz spoke of a “division” in the country, of peace that is endangered. He even recited lyrics from the club anthem of the English football club Liverpool FC, “You’ll Never Walk Alone,” and proclaimed it to be the “motto of this government.”

Government coalition partners, from left to right: Robert Habeck of the Greens, Olaf Scholz of the Social Democrats and Christian Lindner of the Free Democrats Foto: 

Kay Nietfeld / dpa

Despite these assurances, though, many people seem convinced that they will have to deal with this crisis largely on their own. They have seen how many billions of euros the government is pumping into relief and also how quickly it has evaporated. How long can the government continue to offset the costs, especially with a finance minister from the junior coalition partners, the business-friendly Free Democrats (FDP), who has made Germany’s balanced-budget law, the “debt brake,” his mantra?

Although the German government has now approved around 95 billion euros in aid, 60 percent of Germans feel that the relief packages are not socially just, according to a survey conducted by pollster Civey on behalf of DER SPIEGEL. And almost three-quarters of Germans fear that they will be worse off economically in the long term. There is little sign of solidarity, of any broad sense of fairness.

Some in Berlin are watching this eroding confidence in social cohesion with growing concern. It helps explain why the chancellor expects less from one-off payments like those in the current package to students and pensioners. He has higher hopes for the effects of structural change: the recent reform of the country’s system of payments for people on long-term welfare or by raising the income threshold from which people must make contributions to the social welfare system. It was his idea to allow employers to provide a one-time payment of up to 3,000 euros without any payroll taxes to employees to help relieve the burden of higher energy costs, for example.

These times of crisis, in which redistribution, social fairness and solidarity are so important, should actually suit a chancellor with the center-left Social Democratic Party (SPD). One might think he would experience a political boost. But the opposite is the case: For weeks, Scholz’s popularity ratings have been falling. According to a poll by Civey, almost 50 percent of respondents said they were “very dissatisfied” with the chancellor’s work – even after the passage of the latest 65-billion-euro package.

Scholz won his election campaign based on promoting more societal fairness. Those close to him often relate anecdotes of Scholz addressing stagehands, drivers and security staff at big events. Hard-working people, say his confidants, are a primary focus of his.

This can also be seen in the coalition agreement, in which he pushed through one of his most important promises: an increase in the national minimum wage to 12 euros starting Oct. 1. This is a “political revolution,” says the SPD. It’s just that few have really noticed it. On the one hand, Economy Minister Robert Habeck’s star has been shining a little too brightly compared to the more aloof Scholz – at least until Habeck got tangled up in Germany’s approach to the energy crisis, natural gas prices and nuclear energy. The chancellor’s bigger problem, though, is that few citizens seem to believe that the current government led by Scholz will really help them, despite all the relief packages.

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Nicole Geithner’s family, for example, doesn’t expect much from the relief packages. The most vulnerable, Geithner says, are always quickly helped when crisis strikes: The housing benefit is increased, child benefits are boosted, welfare payments will be adjusted for inflation, things like that. They are moves that she fully supports. And on the other side, “the rich” aren’t particularly vulnerable anyway. “They don’t care about three euros for butter,” she says. No one, though, is thinking about families like hers, she says. “We feel forgotten. And yet the middle class is supposedly propping up the country.”

At least the coalition tried to improve their approach with the third relief package. Many experts had criticized the first two attempts, arguing that the measures were too costly and, while they would provide a bit of help to everybody, the overall effect would be minimal. The government, they said, became fixated on cash handouts for everyone. Those who drive large, gas-guzzlers, for example, benefited the most from the summer rebate on prices at the pump.

The programs need to be far more targeted, argues Monika Schnitzer, professor of economics at Ludwig Maximilian University in Munich. Assistance needs to be directed at “those people whose income is so low that there is nothing left at the end of the month and who therefore simply cannot pay higher prices.” Schnitzer is an economic adviser to the government and has taught at Harvard and Stanford. And she’s rather perplexed by the third relief package. “At no point was it clearly spelled out how the 65 billion euros was arrived at,” she says.

Presumably because the government expected the enormous sum to have a greater political impact than the individual measures. The pool of recipients is again large, with more child benefits for families, energy allowances for students and pensioners, and housing benefits for a greater number of low-income earners.

A bottle collector in Hamburg. Foto: Johannes Arlt / DER SPIEGEL

A family with two children and an income of around 66,000 euros will be provided with around 1,000 euros per year in relief, according to government figures. A pensioner earning 12,000 euros will be given around 850 euros in relief, while students and future recipients of long-term welfare payments are expected to be provided with 750 euros.

As with the first two packages, it is questionable how many of the money will actually end up with those who need them most. “You haven’t really reached the lower incomes yet,” Schnitzer says. At the same time, the upper incomes benefit the most from certain tax code adjustments. “I think selling that as relief is questionable,” says the economist.

At the same time, though, the economist says that expectations of the government should be realistic and that solutions in these extraordinary times don’t have to be perfect. They just need to have a clear effect, as this summer’s 9-euro monthly national public transportation pass did. Although it also benefited the high-income bracket, those dependent on mass transit due to a lack of their own vehicle. That’s why Schnitzer thinks the planned continuation of the offer is a good idea – even if the ticket price is expected to be significantly higher that 9 euros if it is continued. “When people feel insecure and threatened, even measures that contradict pure economic doctrine are sometimes not a bad idea,” she says.

It’s highly unlikely the third package will be the final crisis measure. No one knows exactly what to expect in the coming months. Even hardened experts are worried.

People like Timo Wollmershäuser, who has been researching the ups and downs of retail and industry for the past 17 years. Chief economist at Munich’s Ifo institute, Wollmershäuser has experienced the global slump following the Lehman Brothers insolvency, the euro crisis and the economic shock of the coronavirus pandemic. But the barrage of issues seen in recent months is uncharted territory even for him. “It makes it very difficult to forecast what is going to happen next,” he says.

Industry is still short of raw materials, supplies and preliminary products because the Chinese government has paralyzed factories and ports for several weeks at a time in the fight against the pandemic. The U.S. Federal Reserve’s high interest rates are putting a damper on the global economy, a development that is being felt particularly severely by the export-oriented German economy. The war in Ukraine is making raw materials and energy more expensive and driving inflation to levels not seen in Germany in 50 years. Global trade is teetering, a debt crisis is looming in emerging markets – and China and Taiwan could become the next, even bigger crisis for the world community.

Wollmershäuser expects Russia’s energy war to continue to drive up inflation rates, averaging more than 9 percent over the next year. It makes production more expensive and deprives citizens of purchasing power. “The government must be careful that the dramatic rise in energy price doesn’t drive entire segments of the population into poverty,” says the Ifo researcher.

His institutes’s business climate index is forecasting an economic slump across the board, particularly in consumer-related sectors such as retail and catering. Wollmershäuser believes it is a foregone conclusion that the economy will fall into recession from the winter half-year onward. He believes economic output will also contract in the coming year, by 0.3 percent according to the latest forecast.

In the meantime, many companies have the feeling it could be an extremely deep crash, with no immediate return to growth. They fear that energy prices will remain high for years to come and that de-globalization will make many products increasingly expensive.

This is more than just one of the usual economic downturns. The future viability of the German economic and social model is at stake. This may sound overwrought, but a look at the global chaos unfolding helps to explain how dramatic things are becoming.

For almost two decades, Germany has presented itself as a model economy of globalization: strong in exports, cosmopolitan, financially stable and rich. This provided the government with sufficient tax and benefit contributions to maintain the welfare state at a high level despite a stagnating population.

Vladimir Putin’s invasion of Ukraine has put an end to this era. Can the chemical and steel industries survive if they can no longer rely on cheap energy from Russia? Are the once successful carmakers and engineering companies prepared for hostile trading blocs?

Probably not, as the latest economic data from the eurozone shows. For more than 15 years, Germany had been the economic motor of the continent. In the second quarter of this year, though, Germany was the economic laggard, outpaced by former crisis countries such as Spain and Portugal. The formula is simple: If globalization slows down, Germany struggles.

The consequences are severe. “The middle class is depleting their savings right now to maintain their standard of living,” says Wollmershäuser. “The war is making us poorer,” says government adviser and economist Schnitzer. It is also making the state poorer.

In the coming weeks and months, the main issue will thus be where the money is to come from to compensate, at least in part, for the costs of the crisis. Who will fund the current relief package, and who will fund packages numbers four and five, which are expected to follow soon? A week ago Tuesday, at an annual event of employers’ associations, the chancellor pledged further aid for companies. And where would the money come from to finance it? Unclear. And who will pay for saving a climate, which the Federal Constitutional Court recently ordered it is the government’s responsibility to do? In the future, it will be less a question of who will be provided with financial relief and more a question of who should be made to bear a greater burden.

Economist Schnitzer has spent years thinking about this. A member of the German Council of Economic Experts which advises the government, Schnitzer sees two possibilities. “Either more debt or greater redistribution. There are good arguments for both.”

Right now, Germany’s “debt brake” balanced budget law is impeding an increase in borrowing. But Schnitzer believes it is possible for the government to suspend the borrowing rules in the coming year, just as it did during the coronavirus crisis. “That’s quite justified because there is a temporary shock: In one fell swoop, we have much higher prices.” However, Finance Minister Christian Lindner wants to reinstate the spending rule, which would make it difficult to finance further relief measures.

German Finance Minister Christian Lindner has insisted on reapplying the “debt brake,” Germany’s law requiring a balanced federal budget. Foto: Stefan Boness / DER SPIEGEL

Schnitzer also has a proposal for the second option. To redistribute costs, the state could employ a solidarity surcharge on income tax – similar to the one introduced to finance the costs of the reunification of East and West Germany. “The advantage of a solidarity surcharge would be the message: There are strong shoulders in this country, and they should carry more,” Schnitzer says. With the solidarity charge, almost all workers would have to contribute, with high earners paying the most.

How broad some shoulders actually are is hotly disputed within the coalition government in Berlin, which is comprised of the SPD, the Green Party and the business-friendly Free Democratic Party (FDP). The FDP is insisting there can be no tax increases and refers to a pledge in the coalition agreement that taxes would not be raised, even though, from today’s perspective, it was drawn up in a totally different era.

Whatever path the government takes to raise more money, it will only work if the whole country does its part If everyone pulls their weight and makes fewer demands. If people voluntarily agree to a bit of privation.

That, though, can be a tough sell in Germany, as seen by the clumsy effort made by Baden-Württemberg Governor Winfried Kretschmann to encourage people to save on gas by opting for a washcloth instead of a full shower. His comments drew widespread disparagement.

Schnitzer can’t understand some of the outrage. “These are people who haven’t yet recognized the signs of the times,” she says. “We won’t be going around in sackcloth. But we will be faced with some constraints for a period of time.”

II. Is German-Style Redistribution Still a Good Idea?

Heinz Bude has been observing Germans and their customs for 30 years now, and if there is one trait that makes him uncomfortable, it is the tendency toward the “compensation mentality”: the expectation that the state will cover every risk and compensate for any financial losses. “Social solidarity is destined for destruction when everyone is always saying: But I also have to get something,” says Bude.

A professor of sociology, Bude is one of the country’s leading interpreters of society and leans to the left side of the political spectrum. One might think he would be in favor of the SPD’s approach to the redistribution of societal wealth.

A Lamborghini and a man selling a magazine that donates its earnings to the homeless: Societal cohesion has been in decline in Germany since the 1990s. Foto: Johannes Arlt / DER SPIEGEL

These days, though, he doesn’t care much for the chancellor’s polices. It’s a “muddle,” he says of the many relief measures, adding that more and more money is being redistributed to an increasing number of social groups. Instead, he says, it might be time to openly address the fact that some people are going to take a hit.

In times of crisis, Bude’s main concern isn’t about who gets how much. It’s about how much people are willing to support each other. That’s why he doesn’t believe in unilaterally placing a financial burden on those who can most afford it. “That would be completely wrong, because it undermines precisely the cohesion we need.” Bude does, though, agree that those who have a lot should carry a greater weight.

Ultimately, though, it comes down to the question of what, precisely, is fair.

It is, of course, a discussion that could go on and on against the background of European thought starting with Jean-Jacques Rousseau and ending with Immanuel Kant. If only because the term has many facets, from generational fairness to gender fairness to fairness based on achievement. Is it fairer for the state to support the weaker with direct financial aid – or is it better for the state to create a level playing field for everyone?

So far, almost all political camps in Germany have been able to agree on at least one commitment: that a strong state must ensure social balance, equal opportunities and prosperity. For all. Unlike in Britain or the United States, the understanding of a welfare state has developed that has a strong link to redistribution.

Political philosopher Wolfgang Kersting criticized during the financial crisis back in 2008 that the welfare state was not originally about fair distribution, but about preventing misery or balancing power imbalances between employees and employers. Over time, “expectations of care and redistribution” have developed that “can no longer be met as usual by the all-providing state as economic conditions worsen.”

In recent decades, successive governments have continually increased money flows to close the gap between the rich and the poor. But it didn’t work well.

At first glance, the past decades appear to be a success story for the entire country. Average household net incomes, for example, rose by a quarter from 1995 to 2019. The unemployment rate fell below the 5-percent mark in the autumn of 2018 for the first time since 1981.

However, incomes have grown unevenly: Whereas the top 10 percent of society had more than 40 percent more disposable income available to it in 2019 than in 1995, the bottom tenth has just under 5 percent more.

The situation is even worse when it comes to assets. According to the German Institute for Economic Research (DIW Berlin), the top 10 percent of Germans now own more than two-thirds of the country’s assets. The approximately 40 million citizens who belong to the bottom half have to make do with 1.3 percent. Those who are right in the middle of society had a net worth of just under 23,000 euros in 2017, including their car, private pension and grandpa’s gold watch.

A man who collects bottles for the deposit money and a couple walking in Hamburg: The center of society is fraying. Foto: Cornelius Rönz / DER SPIEGEL

“The development since the 1980s has been characterized by two major trends,” says Dorothee Spannagel, who heads the department for distribution policy at the Institute of Economic and Social Research (WSI) of the trade union-aligned Hans Böckler Foundation. She says that the distribution of income has become highly polarized, with both wealth and, especially, poverty widening. In addition, she says that people at the bottom have fewer opportunities to work their way up. “To exaggerate just a bit: once poor, always poor – once rich, always rich,” says Spannagel.

She says that these trends were particularly pronounced in the late-1990s to mid-2000s. “During that time, you could literally watch incomes drift apart – more rapidly than in any other core European country.”

The result is a dangerous dichotomy in society, as a study by the Organization for Economic Cooperation and Development (OECD) and the Bertelsmann Foundation shows. The lower middle class in particular is under pressure. Although the risk of social decline is lower for the upper half of society than it was in the 1990s, it has increased for the lower half.

The fact that the entire middle class shrank from 59 to 53 percent of the population from 1995 to 2018 is almost entirely due to decline of the lower middle class. “We continue to have a broad and stable middle class,” Spannagel says, “but it is fraying at its lower end. The earlier prevailing feeling that with a proper vocational training one had a secure livelihood and could perhaps afford to buy a house one day has gradually dissipated.” People in the bottom half, she says, “have come to realize that even though the economy is humming and they are slaving along, they’re not getting ahead.”

It is a feeling that often manifests itself as a diffuse fear of decline. Rampant inflation is acting as an accelerator.

The entrenched social inequality could be combated, for example with a high inheritance tax on large fortunes or a proposed “basic inheritance,” a one-time government gift payment made to young people to give them better chances at the start of their careers. They are both long-term projects that are highly controversial politically.

But how can such fears be allayed in the short term? In ways other than through a constant increase in transfer payments?

“There will be individual losses of wealth. And they will not come anonymously and automatically, they will be dictated politically,” says Heinz Bude. “The price question for contemporary society is: Can the threat of individual wealth loss be offset by the promise of collective gain?” For that to happen, he says, it is necessary to develop a sense of the country’s public wealth.

Of course, it will be difficult to convey to the citizens that two weeks of vacation in Mallorca are no longer possible, but that good medical care and a functioning legal system also have their merits. Still, Bude says, the government must seek to convey such collective prosperity in a credible way. At least as a kind of temporary diversionary measure, if only out of self-interest.

Bude points to France. He spent time there in the spring for the presidential elections. Marine Le Pen, the far-right candidate, made the loss of purchasing power and wealth one of her main campaign issues – and by doing so, she gave herself a real shot at winning the election. “I think the decline in purchasing power will become the major issue for populists in Europe,” Bude says.

III. Will Germans Take to the Streets this Fall?

Monday demonstrations are nothing new for the people of Leipzig. Demonstrators against the dictatorship in the German Democratic Republic (GDR) were already marching across Augustusplatz square in front of the opera house in 1989, and most recently, it was mainly the “Querdenker” vaccine skeptics who showed up. A march at the beginning of last week, though, was nonetheless an unusual event. The square was divided into two by the tram tracks and the police. On one side, you had around 2,000 supporters of the far-right “Free Saxons” movement; on the other, the far-left politician Gregor Gysi and around 4,000 supporters of Germany’s far left. The demonstrators were from broad swaths of life, including schoolchildren, young adults, pensioners and workers.

Those who stumbled unsuspectingly onto Augustusplatz could be forgiven for thinking that the two groups were protesting about the same issue. Their signs had messages like: “Open Nord Stream 2 Immediately!” in reference to the newly built gas pipeline between Russia and Germany that never went into operation after Russia invaded Ukraine.

Both groups also spoke of an autumn full of protests and of mistakes made by the German government. Left-wing politician Gregor Gysi went after an allegedly “overmatched” federal government, while far-right mouthpiece Jürgen Elsässer ranted into the microphone: “If the government wants to freeze the people for its damn war against Russia, then the people must give the government a hot autumn.”

But while the right-wing extremists want a common front, and say so clearly, the far-left distance themselves from the often bluntly anti-state slogans on the other side of the tracks, where government politicians are declared “traitors of the people.” The distancing was necessary. After all, the left had deliberately chosen a Monday evening for its demonstration, a day that has been marked by extreme right-wing protesters for the last eight years.

Right-wing sympathizers in particular are now hoping for mass protests across the country soon. Like the ones that recently took place in Prague in the Czech Republic, where 70,000 people responded to a joint call by right-wing extremists and communists demanding the government’s resignation.

For the past several years, new waves of anger have been rolling through the country, often mixing fear of change and legitimate concerns about social imbalances with hatred against dissenters and the country’s political leaders.

Hans Vorländer, the chair of political theory and history of political thought at the Technical University of Dresden, calls this mixture of lies and legitimate demands, of far-right groups and a middle-class crowd, “hybrid protests.”

Experts and politicians aren’t currently expecting a popular uprising, but they do believe that some radicalization is likely. Protest expert Piotr Kocyba speaks of violent fantasies, and says it’s possible that more domestic terrorist groups could emerge – as witnessed during the 2015 refugee crisis, when the “Freital Group” began a series of attacks on asylum-seekers and dissidents in Germany.

A homeless person on a bench in Berlin. Foto: Stefan Boness / DER SPIEGEL

But some things are quite likely to be different this autumn. The gas crisis is hitting broad swaths of society, regardless of their worldview. And the protests could be correspondingly diverse, and not only in eastern Germany.

In the city of Pforzheim in the west, Uwe Hück warns of an “uprising of the population the likes of which the Federal Republic of Germany has never seen before.” In a former life, Hück was a professional Thai boxer and his arms are covered with tattoos, including tiger claws and a knife. Hück, though, is more known for being the longtime chairman of the works council at Porsche. As a powerful representative of the company’s employees, he helped shape the sports carmaker’s electric vehicle offensive while ensuring secure, well-paid industrial jobs.

But the trade unionist left the SPD party in 2020 after 40 years of membership and founded a new party called the Citizens’ Movement for Progress and Change, which he represents as a member of the Pforzheim City Council. He wants to give a voice to the disaffected, he says. “They should come to us rather than the AfD,” he says, referring to the far-right populist Alternative for Germany party. Hück no longer feels represented by the governing parties in Berlin. He sees the Greens as nothing more than a “war party,” while the FDP wants to “stick to the debt brake by hook or by crook, thus preventing growth.” And the SPD, he says, is distancing itself from its party base, the workers and the socially weak.

Hück isn’t a radical, and certainly doesn’t lean toward the far right. He is committed to fighting racism and organizes charity boxing matches. Which makes it all the more dangerous when people like him no longer feel represented by the existing parties.

“The government is putting burdens on people that they won’t be able to shoulder in the future,” Hück says. He views the planned gas levy as “a blatant social injustice” because, he says, it will burden pensioners and low-wage earners. “As soon as the living rooms get cold in the winter,” he predicts, “people will take to the streets en masse.”

IV. The Thorny Issue of Equity

Lower Saxony is just the beginning, a first test. In about three weeks, voters there will be called on to elect a new state parliament, and all the campaign issues that parties had intended to emphasize have been thrown into the waste bin. Candidates who want to win must explain how they intend to help the country’s citizens make it through the crisis, who will pay for it and why it is fair.

The Social Democrats should be well prepared. Yet the SPD suspects that the party will be punished disproportionately if they don’t deliver. “A year ago, many people voted for us who hadn’t voted for the SPD in a long time,” said Kevin Kühnert. “But they now also expect that their situation will improve.” The SPD general secretary is standing in an Irish pub in the town of Buxtehude and talking about his vision of a fairer society. The state, he feels, needs to “get to work” over the next year and a half.

Members of the committee of the government coalition in parliament: Green Party head Omid Nouripour, Chancellor Olaf Scholz, FDP head Christian Lindner, Press Secretary Steffen Hebestreit and SPD Chair Saskia Esken Foto: 

Stefan Boness/Ipon

Kühnert is pleased that the government wants to skim off “windfall profits” from energy companies, for example, and is hoping that the idea of redistribution will come to the fore again. “For years, we have had an imbalance between income and wealth development in Germany.” The fact that people can no longer build up financial reserves is unacceptable, he said. In Kühnert’s view, the state needs to once again intervene more strongly in society and markets. “The state’s treatment of basic social rights cannot be the same as that of luxury goods,” the Social Democrat said later at an event in the city of Lüneburg. Certain sectors of the economy, he said, such as housing, need to be more oriented toward the common good. To facilitate this, Kühnert is calling for a different budget policy, saying the debt brake sets the wrong priorities.

Moving away from the balanced budget law and more toward state intervention and redistribution are ideas that are likely to face resistance even beyond the FDP. The conservative wing of the SPD also resists radical redistribution plans, and the chancellor is skeptical too. His focus is on mutual understanding involving employers, unions, economists and representatives of Germany’s central bank, the Bundesbank – a group that met for a second time last Thursday, with the chancellor acting as the moderator.

The social policy ideas of the Greens, by contrast, seem much clearer. In the coalition government, they are pushing for money for those who are either already on or are about to receive welfare benefits. Sources within the party say there are plenty of proposals for how the state could finance this assistance – including by not compensating for cold progression in taxation as the finance minister has insisted, by raising taxes on the rich, by imposing an excess profits tax or by cutting climate-damaging subsidies.

The Greens assume that, at some point, Finance Minister Lindner will have no choice but to abandon his stance on the debt brake. Especially given that his party, which is associated with high wage earners, is likely to have credibility problems at the polls if fairness becomes the major issue in the coming months. The FDP is still seen by many as the party of the wealthy.

When the finance minister recently presented his 10-billion-euro relief model for cold progression in Berlin, he had an inkling of the attacks that would follow. Since then, he has been fond of listing numbers to make it clear that his proposal is “fair,” that the relief for those at the very top is “capped,” but that the vast majority – 48 million people – would get money back from the government. It is Lindner’s attempt to paint social justice in the colors of the FDP.

In the fall, after a report is completed on tax progression and the minimum subsistence level, he wants to adjust the tax rates once again. It is quite possible that even more will then be returned to the citizens than originally planned. The Finance Ministry is talking about 14 to 15 billion euros.

But the debt brake also plays a role in the party’s own search for a social policy: Less government debt, the thinking goes, would have the effect of slowing inflation. Stefan Birkner, the FDP’s leading candidate in the Lower Saxony election, describes it as such: “Leave money for people, especially those in the middle, and let them decide what to do with it.”

A group of tents belonging to homeless people in Berlin. Foto: Stefan Boness / DER SPIEGEL

And what about the conservative opposition Christian Democrats? They obviously enjoy the fact that they can make up ground in the opposition on the issue of fairness. Even if they often sound like a leftist party when they do so. In recent weeks, the Christian Democratic Union (CDU) and its Bavarian sister party, the Christian Social Union (CSU), have railed against the gas levy agreed on by the government coalition, warning that it would favor certain energy companies and have consequences for people with normal salaries. Of all people, former Blackrock supervisory board member and current CDU national chair Friedrich Merz spoke of a social imbalance in the country.

At the CDU party conference in Hannover last weekend, the main motion was entitled “A Clear Course for Secure Energy and a Strong Economy.” Instead of an expensive gas levy of 2.4 cents per kilowatt hour, the Christian Democrats instead believe that “gas importers at risk of insolvency should be given targeted support if this is necessary for the security of the energy supply.” They want relief for people with low incomes and a “price cap” for electricity and gas.

In contrast, there seems to be little room for the far-left Left Party, of all parties, when all the other parties are focused on the issue of fairness. The party is in decline in the polls, and internal disputes are threatening to split the party for good.

But there appears to be one thing that none of the parties are keen to talk about at the moment: privation. Economist Schnitzer believes that many people would also tolerate unpleasant changes for a while – that is, if the parties were to talk about them openly. The only thing that is dangerous is the fear of permanent social decline, she says. Also from a geopolitical perspective.

Countries that are weakened from within quickly end up on the losing side in the systemic competition with authoritarian state capitalism. That, at least, is what Beijing and Moscow are counting on: If Europeans are tearing each other apart in redistribution struggles between rich and poor, it will be difficult for them to offer a unified, strong front. And, at some point, they will run out of the steam they need to get their economies back in shape.

For those in power, says economist Schnitzer, it is important to be able to convey credibly that the crisis will pass. “And that things will pick up again after that.” Because one question remains central for people: “Will my kids be better off than me one day?”

source https://www.spiegel.de/international/germany/inflation-bankruptcies-and-fears-of-decline-is-this-the-return-of-the-sick-man-of-europe-a-41d914b0-0322-46a8-9087-d118b3f0b399