Ailing economy, high energy prices, inflation shock – what remains after the end of the traffic light coalition

Merkur Ailing economy, high energy prices, inflation shock – what remains after the end of the traffic light coalition Theresa Breitsching • 12 hours • 5 minutes reading time An obituary The end of the traffic light coalition comes at a time when the German economy is under severe pressure. A look back paints a bleak picture. Berlin – “We screwed it up,” commented SPD foreign policy expert Michael Roth on the end of the traffic light coalition. “This relationship, this ménage à trois was shattered,” said Roth on BR television – in the end, everyone had failed, not just FDP chairman and former finance minister Christian Lindner. An obituary for the traffic light coalition reveals a bleak picture: the economy is in crisis, unemployment has risen, energy prices remain high – and much is likely to remain undone. The traffic light coalition no longer exists – where is the “economic miracle”? The end of the traffic light coalition came about because of disagreement over the suspension of the debt brake. As a result, Chancellor Olaf Scholz (SPD) dismissed former Finance Minister Lindner. "I see myself compelled to take this step in order to avert damage to our country," he said. Since then, the federal government has only consisted of two partners: the SPD and the Greens. Not all FDP politicians have left the cabinet, however, as Transport Minister Volker Wissing remains in office as an independent. The end of the traffic light coalition comes at a time when Germany's economy is already ailing. Last year, Scholz had announced an "economic miracle". At the time, he told the Neue Berliner Redaktionsgesellschaft: "Due to the high level of investment in climate protection, Germany will be able to achieve growth rates for some time, as was last seen in the 1950s and 1960s." The traffic light coalition also started 2021 with the announcement of a "green economic miracle". But in 2024 it will be clear what is left of it: a weak economy marked by job cuts and bankruptcies, high energy prices and the looming threat of deindustrialization. The question remains: what conclusions can the traffic light coalition draw from the past few years? Economic problems remain even after the traffic light coalition ends The German economy still cannot hope for an upturn by the end of the year. Recently published figures from the Bundesbank show that "economic activity will stagnate more or less from today's perspective" in the last quarter too. Germany is therefore currently in a so-called technical recession: two consecutive quarters with declining gross domestic product (GDP) indicate a sustained period of economic weakness. There was already a slight decline in GDP in the spring, and economic output fell again slightly in the summer quarter. The sharp rise in inflation and energy prices after the corona pandemic and the Ukraine war significantly reduced Germans' real incomes and savings. Although this was not the responsibility of the federal government, the traffic light coalition's policy made it more difficult for citizens and companies alike to escape the inflation shock, writes the FAZ. The supply chain due diligence law and other regulations have noticeably increased costs for companies, while the climate change has unsettled many citizens - especially Vice Chancellor Robert Habeck's (Greens) heating law. Traffic light coalition's climate balance: Heating law debacle, photovoltaics strong Entrepreneur Max Viessmann commented on the heating law debacle in the spring: "What has happened around the heat pump is nothing short of dramatic." Heat pump technology has been talked down. "The myths that have been spread, the polarization and populism that have taken place have left me speechless." Sales, which had temporarily risen to 360,000 units per year, have stalled and are now likely to be only slightly above the level before the traffic light coalition. The goal of installing 500,000 new heat pumps annually was therefore not achieved. While the expansion of photovoltaic systems has increased by around 60 percent since the start of the government, growth in onshore wind power has lagged significantly behind at just 1.6 percent. Nevertheless, the share of renewable energies in total electricity consumption has increased from 44 to 57 percent. "We are on track," said Habeck in the autumn with regard to the German electricity mix. In the first nine months, around 218 terawatt hours of electricity were produced using renewable energies. In addition, the number of battery-powered electric cars on Germany's roads has almost tripled to 1.5 million. However, with a total of 49 million registered cars, the share of electric cars remains low. The end of state subsidies in 2023 and the high acquisition costs have also significantly slowed demand. Due to the low demand, the local electricity market is also weakening.