Germany closes in on SPD-led government with Scholz at helm

Olaf Scholz has moved closer to succeeding Angela Merkel as German chancellor after his Social Democrats agreed with the Greens and liberal Free Democrats on moving towards formal negotiations to create a three-party coalition.

At a joint press conference in Berlin on Friday, Scholz hailed the results of eight days of exploratory talks on a tie-up that has no precedent in Germany’s postwar history. “A new start is possible with the three parties that have come together here,” he said.

The announcement indicates that Germany is heading for an SPD-led coalition with Scholz as chancellor and that Merkel’s CDU/CSU will be confined to opposition for the first time in 16 years.

The SPD, Greens and FDP all saw their share of the vote increase in last month’s election, while the CDU/CSU slumped to 24.1 per cent — the worst result in its history.

The three parties released a 12-page paper on Friday that sketched out what they had agreed during the talks. This will form the basis of formal coalition negotiations.

The document must still be approved by a Green party conference scheduled for this weekend and by the governing executive of the FDP, though both are expected to give the go-ahead for formal talks.

Scholz said the three parties had agreed to implement the “biggest industrial modernisation project Germany has undertaken in more than 100 years”, with huge investments in climate protection and an overhaul of the country’s creaky bureaucracy.

“There has not been a comparable chance in a long time to modernise our society, economy and state . . . and we can’t let this chance pass us by,” said Christian Lindner, FDP leader.

The three parties also wanted to “significantly increase” private and public investments over the coming years, but without touching the “debt brake” — Germany’s constitutional restriction on new borrowing.

The Greens had called for a loosening of the rule to allow €500bn in investments over the next decade, much of it financed through increased public debt. But the FDP has always insisted the debt brake must stand.

The paper contains important SPD election promises, such as a commitment to raising Germany’s minimum wage to €12 per hour. It also rules out any cuts in the state pension or an increase in Germany’s pensionable age, and says the next government should aim to build 400,000 new flats a year, 100,000 of them in the social housing sector.

It also satisfies Green demands, saying Germany’s next government must “drastically accelerate” the buildout of renewable energy and exit all coal-fired power by 2030 — eight years earlier than currently planned. All new commercial buildings will be obliged to have solar panels installed and 2 per cent of Germany’s total territory will be set aside for wind turbines.

But the Greens were unable to overcome liberal resistance to one of their big demands — a speed limit on German motorways. The FDP also blocked any attempt to raise the income tax rate for high earners and to introduce a wealth tax — a demand of both the SPD and Greens.

The FDP also got its way with a mention in the paper of one of its key demands — “super” tax write-offs for investments in climate protection and digitisation.

The paper says the three parties will strive to create a “digital state” that works “proactively for its citizens”. Administrative procedures will be accelerated, bureaucracy reduced and big investments in fast internet mobilised. The parties also said they would seek to reform Germany’s citizenship laws to enable immigrants to obtain residency status more quickly.

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