In this interview with Cyba Audi from Asharq Business Bloomberg, Christof Rühl, member of the Advisory Board of Crystol Energy and a Senior Fellow at the Center on Global Energy Policy at Columbia University, comments on the elections of the new German Chancellor, Olaf Scholz.
Christof delineates two major challenges that Scholtz will face once he enters office: first, how will he react to inflation and the threat of a weakening economy? Second, will he be able to reconcile between the three different parties of his coalition?
On the inflationary front, the Chancellor does not have much to do as this is under the power of the European Central Bank (ECB) which is independent of EU governments. However, if low interest rates persist, this will weaken the Euro thereby making it easier for Germany to ramp up its exports to the rest of the world.
Economic issues are never out of the control of politicians; however, most democratic nations have different political parties. Scholtz comes from a leftist party that used to represent syndicates. Historically, the party had limited support due to more Germans working in the service sector than in the industrial sector. Scholtz, however, won the elections due to people’s wish to change the old chancellor. He has two allies, the Liberals and the Greens. The latter prioritise the environment at the expense of the economy. The former prioritise the economy without caring much for the environment. Such differing agendas will lead to a new dynamic that Scholtz has to understand and act in the benefit of maintaining minimum consensus in the coalition. The question is how long will the coalition stand in face of all these moving parts? It is highly unlikely that it will be able to survive as long as Merkel governed.
Historically, Germany had a stable foreign policy led by ministers and advisors of sound experience in managing it mainly due to Merkel’s deep understanding of Russian Foreign Policy (she is originally from East Germany). Currently, the appointed foreign minister is from the Green party with limited experience and exposure to high-end government positions. It is, thus, crucial that the minister learns and quickly adapts to the new challenges, including Nord Stream 2, the dispute over Ukraine, and the future of NATO.