Copyright Tim McDonagh

Olaf Scholz: a tailor-made chancellor

With a centrist style, the social democratic victor has been described as “continuity Merkel.” But as long as he can now capitalise on his record-breaking swing from Angela Merkel’s Christian Democrats, the nation is set for newly radical leadership
September 27, 2021

Two years ago, the German Social Democratic Party (SPD) was attracting not votes but obituaries. Germany’s traditional centre-left party—and the grandfather of labour and social democratic parties across Europe—had sunk to fourth place in the polls, behind the far-right AfD on just 11 per cent, with no apparent respite in view. Its junior status in Angela Merkel’s fourth coalition looked like the final death knell. I remembered the advice that Merkel gave to David Cameron, when he was faced with the necessity of a coalition in 2010: “You hug your smaller party close, then squeeze them dry.” She did this to the SPD not once, but three times during her 16-year reign.

So riven and demoralised was the SPD as it embarked on its last forced embrace with Merkel three years ago (strong far-right and far-left contingents in parliament effectively made a grand coalition the only way through) that it wouldn’t even elect Scholz, its senior minister in that coalition—and Germany’s vice-chancellor and finance minister—to be one of the party’s co-leaders. Instead, it opted for two hard-left rivals.

Olaf Scholz was the leader rebuffed. But he is now frontrunner to become Germany’s next chancellor, having led the SPD to a remarkable—if narrow—victory after a long and highly personalised election campaign, in which the party had started in third place, running not only behind the Christian Democrats (CDU) but also the Greens.

The winning margin may be slim, but if he can seize the moment, Scholz will draw considerable prestige and momentum from a result that nonetheless amounts to an astonishing achievement. Even putting aside the SPD’s dire last decade, this is an exceptional election outcome in the broader context of the nation’s postwar story. In the seven-decade history of the Federal Republic, the SPD has topped the ballot on only three previous occasions; the CDU, in its alliance with the more conservative Christian Social Union (CSU) in Bavaria, has done so 16 times. In today’s fractured political scene, neither main party is as big as it used to be, but the swing between them since Merkel’s last win in 2017 is a very substantial 7 percentage points. That is the biggest two-party shift ever witnessed in a single election under a Federal Republic that is known for its political stability.

True, everything still turns on the left-leaning Greens and the right-leaning Free Democrats (FDP), both of whose seats will somehow have to be cobbled together with one of the major blocs to form a majority government. But after overtaking Merkel’s CDU successor Armin Laschet in both votes and seats, it is Scholz who goes into the coalition talks with the initiative.

The Greens and the FDP could still conceivably side with the CDU, but—and particularly if the losing Laschet remains at the helm—it would be hard to justify backing the declining second-placed party, visibly exhausted by 16 continuous years in office, rather than the ascendant winner. For the Greens especially, it would be an extraordinary contortion to go against the more progressive, larger force. All the more so since Laschet will now be prone to post-election rivalries and recriminations: even the CDU’s permanent alliance with the CSU is under strain. Merkel’s presence as caretaker chancellor until a new government is formed only highlights the party’s inability to move out from under her shadow.

It may well take prolonged horse-trading to produce what will be the first three-party coalition since the early years of the Federal Republic in the 1950s. But it would be surprising if the eventual result is not Chancellor Scholz.

How did this sober and taciturn 63-year-old pull off this extraordinary turnaround? Simple: Scholz was the best candidate in the election. As German voters increasingly appreciated during the campaign, he has the obvious personal credentials and capacity one would ask of a chancellor. He’s been a highly competent finance minister and vice-chancellor for the past three years, and, for the seven years before that, was mayor of Hamburg, Germany’s second city and a federal state in its own right. He looks tailor-made for the job.

Dig further back, and you find relevant experience that is truly lifelong. A virtually full-time student politician at university in Hamburg, the city he grew up in, he rose to be vice-president of the International Union of Socialist Youth when barely out of his teens, conforming to one of my maxims—that winning democratic leaders mostly hail from the “club of 30,” being first elected to public office or seriously engaged in politics by that age. (Biden, Blair, Obama and Modi were all initiated into this freemasonry.) He went on to build a successful labour law practice which, much like the young Boris Johnson’s Spectator journalism, was politics by other means. He then got elected to the Bundestag and has been in public or political office constantly for the last 23 years.

After two decades at the top of German politics, he remains strikingly well-liked, with few enemies. His personal life is discreet and modest in equal measure. He doesn’t own a house but rents flats in Potsdam and Hamburg with his wife Britta Ernst, another lifelong SPD politician, now education minister of Brandenburg. Moreover, like the best German politicians, Scholz is well able to hold his own in intellectual discourse: he would be at ease discussing John Rawls and Michael Sandel with Gordon Brown or Barack Obama, or in a university seminar. “He is equally at home talking to dockers in Hamburg harbour, then an hour later meeting Navid Kermani [Germany’s foremost thinker on the interaction between Islam and the west],” says Michele Augur of the Friedrich-Ebert-Stiftung centre-left think tank.

“From the outset Scholz conceived of his role as changemaker, not just administrator”

The resurrection of the SPD under his watch bears out the line I have long peddled in Prospect: that the only thing that ultimately matters in democratic politics is leadership. It’s not that parties, policies and organisation are insignificant; rather, that they only operate in the context of successful leadership and cannot substitute for it. Tellingly, September’s other big election, in Canada, also eventually turned on a match-up of personalities. Although beleaguered after two terms and with an indifferent governmental record, Justin Trudeau ultimately prevailed in the unnecessary and unpopular poll he had called, because of his head-to-head edge over the drill-sergeant Conservative leader Erin O’Toole. 

It must be admitted that Scholz was lucky in his opponents too. Occupying Merkel’s CDU shoes was the floundering and gaffe-prone Laschet, while Annalena Baerbock, the fresh and initially popular Green leader, wilted in the limelight from inexperience and an inability to reconcile her party’s centrist and radical wings.

But life’s spoils are claimed by those who are present and able to dominate. In an election without Merkel, Scholz was the most senior incumbent from a fairly popular government, and he was shrewd to portray himself as the continuity candidate, helped by a serious, understated style and even mannerisms that aped the outgoing chancellor. He obviously isn’t, any more than her, a leader with scintillating charisma. (“He’s the closest thing to a political automaton,” an ex-colleague of Scholz’s said to me, “and I’m only slightly exaggerating.”) But like Britain’s Clement Attlee, who sprung from effective if unglamorous service in the office of deputy prime minister during the war to lead Labour out of a long electoral wilderness in 1945, Scholz is more naturally suited to governing than campaigning—or, perhaps more precisely, the way of campaigning that comes naturally to him is by demonstration of governing competence. And it worked.

Leadership, then, explains the election result: all else is embellishment and detail. But read on, because it is vital to understand that Scholz is not—as most of the commentators and even Scholz himself has suggested, when convenient to his campaign—the “continuity Merkel.” Yes he is, like her, broadly a centrist in his support for Germany’s postwar “social market” balance between state and free enterprise. But he is also a radical who thinks deeply about serious reform to tackle deep-seated challenges, and one who will take Germany and Europe in new directions. His agenda is not Merkel’s and, in the endgame of her chancellorship, it was he who squeezed her dry and not vice versa, while uniting his own party’s centre and left behind an inclusive slogan of “respect.”

It was a carbon copy of how he unexpectedly won the mayoralty of Hamburg from the CDU in 2011, with a modernising, socially activist but business-friendly programme oozing reassurance and reform in equal measure. He was re-elected to a second term in the city and only left after seven years, when destiny and Berlin called. By then he had a strong personal reformist brand, which has grown since to include his part as a consensual but innovative finance minister during the pandemic.

It would, however, be wrong to discount the SPD brand from his success, not least because he is keenly aware of the tradition he grows out of, and its heritage will condition the way he governs. It is Germany’s oldest democratic party, boasting—despite the rarity of its outright wins—three considerable chancellors since the war. There were Willy Brandt and Helmut Schmidt in the 1970s and Gerhard Schröder after Helmut Kohl’s demise in 1998. For all its vicissitudes, including its recent spell of left-wing Corbyn-style leadership before Scholz became “chancellor candidate,” the party never quite lost its governing aura, not least because it is well-used to running things in many of Germany’s 16 federal states, as well as Berlin.

Just like their leaders, parties have something akin to charisma—a legacy built by past leaders whose shadows persist. Scholz owes a drink to Schröder, whom he served as SPD general secretary in the early 2000s, as well as to Brandt and Schmidt—the latter also Scholz’s youthful mentor and, before he became Germany’s chancellor, a fellow Hamburg city father. A longer shadow extends back to Otto Wels, the only party leader to speak out in the Reichstag against Hitler’s Enabling Act of 1933, earning the nearest thing to immortality for any political party in modern Europe. “You can take our lives and our freedom,” Wels told the dictator to his face, “but you cannot take our honour.” This is no minor detail, for it gives the SPD a trans-partisan place in the story of democratic Germany. In tribute to that, Merkel attended the SPD’s 150th anniversary celebration in Leipzig eight years ago.

What makes the continuity Merkel label fundamentally wrong is the substantive record of Scholz’s three stints in government, totalling 13 years across Berlin and Hamburg. He has not just shown he can survive in power; he has been a transformative centre-left leader in the process.

Here goes, in quick-fire summary, so you get the cumulative effect.

As mayor of Hamburg, a city suffering the full range of industrial and millennial challenges typical of large western cities, Scholz launched a programme to build 6,000 homes. It expanded to 10,000 to accommodate the refugee influx post-2015, which he welcomed, writing personally to all non-Germans who had been resident for more than eight years, urging them to seek citizenship—a controversial step—through a process which involved new citizenship ceremonies in the town hall, giving Hamburg the highest naturalisation rate of any region in Germany. He abolished student university fees, lengthened the school day and greatly expanded free childcare. And he appointed Hamburg’s most senior business leader—Frank Horch, president of the chamber of commerce and former manager at the shipyard Blohm+Voss—as a non-partisan economy secretary, charged particularly with carrying through the controversial—and previously stalled—expansion of the river Elbe to maintain Hamburg’s status as Germany’s premier port.

The Elbe project—a massive 116km deepening and widening of the whole fairway of the Elbe, from its North Sea river mouth into the port of Hamburg, just completed—is vital to the city’s capacity to handle the largest modern international container ships. It was a business imperative, but opposed by much of the SPD and the Greens, the latter of whom nonetheless became his coalition partner in his second term as mayor, when he lacked an overall majority. He and Horch got it through by patient explanation and negotiation, in the city and with its neighbouring federal states of Lower Saxony and Schleswig-Holstein—which were opposed—as well as the Berlin government and the European Commission, to gain the necessary exemption from the EU’s habitats and other environmental directives.

Then a string of new railway stations were opened across Hamburg as part of a public transport infrastructure strategy and, thanks to Scholz, construction is beginning of a new 24km metro line going east-west across the city, like London’s Crossrail. He also sorted out the notorious inherited crisis in the financing and construction of Hamburg’s new concert hall the Elbphilharmonie (popularly called the “Elphi”), part of the regeneration of the declining and seedy HafenCity port district and now a jewel in the city’s crown. A friend who attended the opening jamboree, on a boat touring the port, encountered the mayor on the top deck, cigar in hand, “beaming and proud.”

As Schröder’s SPD general secretary, and later labour minister in Merkel’s first grand coalition, Scholz played a formative part in the controversial “Hartz IV” reforms that squeezed unemployment benefits, but ultimately made the German economy more competitive. Merkel’s domestic project has basically been to embed and embellish the Hartz reforms. Scholz is equally clear that it is high time for workers to share in the fruits of their earlier sacrifices: the introduction of a statutory national minimum wage in 2015 was rooted in his plans as labour minister, and one of his key election pledges is to increase it to €12 an hour.

“Scholz is keenly aware of the tradition he grows out of, and its heritage will shape the way he governs”

As German finance minister, Scholz made possible the EU’s €750bn post-Covid recovery fund—the biggest step so far towards an EU-wide fiscal capacity, the absence of which had previously been the greatest structural weakness in the single currency—a weakness that Berlin had previously been the mightiest obstacle to fixing. He oversaw, too, Germany’s plans, broadly adopted by the EU, for a banking union and for global digital taxes. He also severed the German elite’s attachment to schwarze null (“black zero”)—an allergic aversion to public debt that has particularly hampered infrastructure investment. As pandemic finance minister, he suspended Germany’s constitutionally enshrined debt-brake rule for two years in a row. This was a “historically exceptional situation,” he explained. Permanent innovations often start with those words.

Of course, much of the credit for all this is collective, and there have been Scholz failures too. Financial regulation, notably the accounting scandals that led to the insolvency of the German payments company Wirecard, dogged him as finance minister, and his plan for Hamburg to bid for the 2024 Summer Olympics was overturned in a region-wide referendum. But he may have been right on the Olympics—how many Londoners regret hosting the 2012 games, despite all the prior controversy over the costs? Moreover, the episode again makes the real point. Whereas he has stylistic similarities to Merkel—subscribing to her mantras “in calmness lies power,” and always taking care to present your ultimate course as so obvious and commonsensical that it is alternativlos (“without alternative”)—in his activist “do-something” instincts and his determined, hands-on reformism of spirit, he is her antithesis. Formidable as she may be, Merkel rarely makes a decision until she has to (another Merkelian motto is “give time to time”) and almost never makes a move of any significance without consulting the polls. Her management, or mismanagement, of the Euro crisis largely consisted in kicking the can down the road, and putting up with a miserable drift that it is hard to imagine Scholz could have borne.

“I have worked for him for 20 years and stayed because he has an extraordinary capacity to make change happen,” says Wolfgang Schmidt, Scholz’s chief strategist and deputy as finance minister, and a former state secretary in Hamburg. He identifies Scholz’s essential qualities as leidenschaft und vernunft (passion and reason) and ordentliches Regieren (leading a sound and reliable government), which reminds me of Roy Jenkins and his social democratic concept of radical, competent centrism.

Schmidt highlights Scholz’s “transformational approach” during the Hamburg mayoralty. In contrast with his time as Merkel’s deputy chancellor, back in Hamburg “he was unambiguously in charge and responsible, which is akin to the post he is now likely to assume. From the outset he conceived of his role as changemaker, not just administrator, while patiently yet systematically building the broadest possible consensus for change. I think he will do that too as chancellor.”

For all the criticism of his finance ministry’s handling of the Wirecard and other serious financial regulation problems of recent years, “no one believes he is personally on the make,” says Schmidt, “and his whole lifestyle cries against it.”

All told, the Scholz years in Hamburg were marked by its social and industrial advance. Amid the post-Covid turmoil engulfing Europe and Germany, the hope must now be that Scholz can do for his country, and for his continent, what he has already done for his city.