Post-election Germany will be as ungovernable as it is now

Berlin's industrial and economic power is undisputed, but its political identity and sense of self-worth are not.

Chancellor Olaf Scholz with fellow SDP politicians Saskia Esken and Lars Klingbeil (via Alamy)

“When I think of Germany at night, I am deprived of sleep", said the great poet Heinrich Heine, whose complete works in 10 volumes sit on the bookshelf behind where I am now sitting, in his 1844 poem “Thoughts in the Night”. He wrote these lines four years before 1848, the great year of revolution and the one in which modern Europe was conceived. It was also 23 years before Germany was unified in the aftermath of the Franco-Prussian war that deposed Napoleon III under the crown of Prussia. We today tend to think of Germany in its 20^th century incarnations, all jackboots and obedience. Not at all.

Germany thinks of itself, and not at all without justification, as the country of poets and philosophers. And, having been educated in the Germanic cultural vortex, I cannot disagree. A library full of books has been written about the Germans and, perhaps because their image is so tainted by the events of the mid-20^th century, it is particularly hard to get to the heart of what makes those people tick.

My own roots are both deeply Germanic and proudly Jewish and were it not for the extraordinary and tragic period between 1933 and 1945, I would today probably be Hans Pinkus – both my father and my grandfather went by that name – and not Anthony Peters. But history's unpredictable course contrived to park me in the Cotswolds as an Englishman and I am more than comfortable with my fate. That said, and although I do not have sleepless nights thinking of Germany, I still watch the country with great interest. I have also decided, as opposed to many of my friends, not to take advantage of my provenance and to take out a German passport and EU citizenship of convenience. Citizenship means a lot more to me than having papers that make going on holiday easier and passing through a faster immigration queue at the airport. I was not scandalised when British politician Norman Tebbit introduced the concept of the “cricket test” in which he suggested that the true test of nationality is not in the passport but in which side one supports in an international game of cricket. He was of course decried as a racist but that is not the subject.

Unification had begun in 1834 with the formation of the German customs union, a sort of pre-pubescent Schengen, and in 1866 the first steps to political unification were taken by the creation of the Prussian-led North German Federation but it was not until the kingdoms of Bavaria and Wurttemberg, the grand duchies of Baden and Hesse and the free Hanseatic cities of Hamburg, Bremen and Lübeck kissed the ring that the king of Prussia became the Kaiser, the Caesar, the emperor of a greater Germany. Notably, the majority German-speaking countries of Luxembourg, Liechtenstein, Switzerland and Austria declined.

For the next 100 years, and some might argue to this very day, Germany has been trying to work out what it wants to be when it grows up. Its industrial and economic power is undisputed, but its political identity and sense of self-worth is not. Please pardon the crudge generalisation but I know no other people where, other than when supporting the national football team, being a citizen of Europe trumps being one of the home country. The post-1945 division and loss by annexation of large swathes of its eastern territories which perchance included my ancestral homelands, put the development of a national identity on ice. In 1989, 44 years later, the Federal and the Democratic republics were politically reunified but as yet, a further 35 years on, the citizens of the two sides of the divide still cannot see themselves as one.

Even 180 years after Heine wrote those words, Germany remains politically an experiment.

Yesterday, we witnessed the formal fall of the “traffic light” coalition of the social democratic SPD (red), the liberal democratic FDP (yellow) and the Greens. We generally think of the Greens as a left-of-centre environmentalist political party but in Germany, where the movement began life in the 1970s, the mythical power of nature supersedes politics. Read the fairy tales of the brothers Grimm and see what a central part is played by forests and lakes. It was “Waldsterben”, the forest dieback of the 1970s that found itself at the centre of German public discourse and that fuelled the growth of the Greens at a time when the other two great European powers of France and Britain were engaged in post-imperial reorientation. Germany’s very modest engagement in the epic 19^th century Scramble for Africa had, much to the chagrin of Kaiser Wilhelm II, never made it a colonial power and what territories it had gained were lost in 1918.

Subsequently, and this should never be underestimated as a significant factor in later social history, German has never become a global language. Since early industrialisation, Germany has economically batted above its average, but on the global political stage, it has not.

Then along comes the European Coal and Steel Union which morphed into the EEC and eventually into the EU. The UK joined the EEC in 1973. By the time of the Brexit referendum in 2016, the argument was that the EU was about trade and that the Brits had never bought into political union. Wrong. Political union was in the grand European project’s DNA ever since the founding fathers Jean Monet and Robert Schuman had in 1957 drafted the Treaty of Rome.

Since I was in the 1970s reading politics and modern history I had observed and been perplexed by the phenomenon that all things Europe were shared equally between Germany and France. One took the decisions and the other paid the bills. Until Ursula von der Leyen was in 2019 parachuted into Brussels as the least possible disruptive President of the European Commission, no German had led the Union in any of its incarnations since Walter Hallstein stepped down in 1967. Given that a unified Germany generates over 21% of the EU’s GDP and provides 19% of its population, its absence from the top roles – there has yet to be a German president of the ECB – looks decidedly uncanny.

Assuming Federal President Frank Walter Steinmeier puts his signature on the document, Germany goes to the ballot box in February. But according to the latest opinion polls – not that we can believe them – the country will after the elections be as ungovernable as it is now.

The CDU/CSU are polling 32%, followed by the unmentionables of the AfD at 18% and the SPD on 16%. The FDP, for many years the centre party tasked with being the balancing power and coalition partner of choice is below 5% and will, if nothing changes, not be present in the new Bundestag. The Greens are on around 12%. To keep the AfD out of government, something that all parties other than the AfD itself believed to be politically paramount, the new coalition will have to be made up of the CDU/CSU, the SPD and the Greens, a mix that didn’t work last time round and that will be no less unstable than the departing coalition. Friedrich Merz, the leader of the CDU, would race a dead heat with Olaf Scholtz in terms of individual popularity, or unpopularity if you prefer.

This is not the first time in recent years that Germany has been in a mess. In the post-reunification period, which I at the time referred to as the biggest leveraged buy-out in history, the country was financially on its uppers. It was rescued by the rise of China and the seemingly limitless demand for German machine tools, cars and low-to-medium tech. It is easy to now castigate German industry for having helped China build the club with which it is now economically being beaten to a pulp but what would you have done better?

For a number of years, and after having been spat out by the mainstream banking system, I made my crust as a self-employed “eat what you kill” agency broker. One of my best friends was the late lamented Matthias Muth who had learnt his trade at Pru Bache and later Drexel Burnham and, after the latter had imploded over Michael Milken and all that malarkey, he had set up his own agency brokerage back in Frankfurt. He made a tidy though not spectacular living. For years and years, he had tried to find others who might care to join his platform on a basis of commission sharing. He never found anyone. The first questions unemployed local bond salespeople, the lifeblood of agency broking, would ask him at an interview was about “Sozialleistungen”: social benefits. Office hours, paid holidays and pension contributions were their primary concern, not how much they could make working for themselves. He once did have a colleague in the office who, however, jumped ship at the first offer of paid employment.

In short, Germany and Germans lack entrepreneurial cojones. It doesn’t make them bad people. Americans in a recession don’t rely on the state to feed them but set up a business in the garage. If it fails, they try something else. Hewlett Packard was started in a garage and, for all intents and purposes, so was Apple Inc. Germany’s first and only meaningful computer maker, Nixdorf, failed. In SAP, it has a world class IT player but for the world’s third largest economy that’s not a notable score.

In my years in markets, I experienced the leaden footedness of German authorities. In more than a few cases they were right in resisting American “innovation” and “financial engineering” and had they stuck to their knitting they would have avoided much of the nastiness of the GFC. When, however, they opened the door just a crack, the Goldmans and Lehmans and Merrill Lynches were like rats up a drainpipe and, before many of the German banks had quite understood what was going on, they had been raped, pillaged and left for dead.

And now for the key question. Can the EU survive, or continue in its current form, without the moral leadership of France and the financial backing of Germany? Once again the Germans have the correct words which are “Flucht nach vorne”, flight forwards. This is not the same as the English “fight or flight”. It means that if things don’t work, accelerate out of the problem zone and try something new. The European project has for over fifty years done just that. When cracks emerged, rather than dealing with them, a new layer of concrete was cast over the top which covered them up and discussion was moved on. The matter of currency union without a fiscal union has been left behind as unresolved as ever. Close your eyes for long enough and with a bit of luck the problem will go away.

France and the UK have in 2024 proven that wonderful democratic elections do not resolve problems and in many cases only create greater ones. Germany will in early 2025 join the club. As far as the US is concerned, I best keep my own counsel.