Stability (and changes)

The rank and file of the German Social Democratic Party (SPD) has overwhelmingly voted for the “grand coalition” agreement struck between the leadership of the SPD and that of Angela Merkel’s Christian Democratic Union (CDU), and its Bavarian branch (CSU). In a short time Germany will have a new government, again headed by Merkel, bringing a transition conducted in an exemplary spirit of calm routine to an unsurprising close. The internal referendum of the principal party of the German left follows upon the primary elections of their French colleagues, in a sequence of grassroots democracy that will hopefully be an antidote to populism. And the Christian Democrats’ responsible conduct in the search for a broad and stable majority in both chambers symbolizes the enviably democratic character of the right in that country.

For the EU this is a positive, if expected, development within its biggest member state. The government resulting from the negotiation shows a suitable combination of stability and the possibility of reform. Continent-wide stability is welcome during the present time, when the European Union is in a process of change. The turn to the left implicit in the new coalition is an effective change, albeit not a radical one in the sense of overturning all the policies of the former Christian Democrat-Liberal alliance. But it promises to be tangible: the socially oriented changes alone will afford greater room for other elements of economic policy, from the deployment of (always selective) measures to stimulate demand, to the improvement of potential mechanisms of solidarity (including that of banking union), though introduced in phases and with extreme prudence.

While more conclusive analyses must await the implementation of the coalition agreement, everything indicates that the era of excessive austerity is coming to an end — if by excessive we understand permanent austerity, independent of economic cycles, expansive or recessive; in all economic policies simultaneously, particularly in budgetary and monetary policy; and prevailing in all the countries of the EU, regardless of their circumstances.

Unlimited austerity

The corrections now to be applied to this restrictive excess are clear: the introduction (even if by phases) of a minimum wage, three times that of Spain’s, modifies some excesses of the sacrifices demanded of the workers a decade ago by the Social Democrat Gerhard Schröder; while the flexibility in retirement age in some cases contrasts with what has so far been demanded of the most vulnerable peripheral countries. Thus the array of arguments in favor of restructuring public finances and containment of social spending is also to be pressed with less energy. Unlimited austerity is probably now dead, and a period of a more balanced and proportionate sobriety is beginning — albeit one that is conditional upon the availability of funds with which to finance social expenditure and pending infrastructure.