AfD Bogeyman Finishes Second in Saxony and Brandenburg

Yesterday elections were held in two states of the former East Germany, Saxony and Brandenburg (see "German Far Right Makes Election Gains, but Falls Short of Victory" by Melissa Eddy and Katrin Bennhold). Predictions were rife in the mainstream press of victory for Germany's far-right Alternative for Germany (AfD) party. It didn't turn out that way. In Saxony, Angel Merkel's Christian Democratic Union (CDU) came out on top with 32% of the vote, compared to AfD's 27%. In Brandenburg, the CDU's GroKo partner, the Social Democratic Party (SPD), won with 26%, compared to AfD's 24%. The AfD saw its vote increase by 18% in Saxony and 12% in Brandenburg from the last election in 2014. 

All in all an impressive performance if short of outright victory. The other parties refuse to govern in coalition with AfD. So long as this shunning holds, AfD will have to win significantly more votes before it can implement its unremarkable policy prescriptions.

In Saxony and Brandenburg, the AfD campaigned on the broken promises of economic development of East Germany post-reunification. Katrin Bennhold published a story on Saturday (see "German Elections Reveal, and Deepen, a New East-West Divide") which chronicled her visit to Forst, "a once prosperous textile hub on the Polish border that lost thousands of jobs and half its population after the fall of the Berlin Wall."

Bennhold interviewed a number of Forst residents soured on the false promises of capitalism:

“There is a sense that things are decided over your head, that you have no say in anything,” said Diana Sonntag, a restaurant owner and mother of six.

“We in the East are familiar with that,” she said. “We’ve been there before.”

Under Communism, the party called the shots, she said. Now the market does. “I’ve come to realize that everything they taught us about capitalism all those years ago is true,” Ms. Sonntag said. “Politics is just for show. Money rules.”

One would be hard-pressed to find a more succinctly accurate description of electoral democracy in the Western world.

Disintegration of the Social Democratic Party in Germany

Coalition talks are still underway in Germany. Judging from a story in The Guardian by Philip Oltermann, "German parties hope to reach coalition deal this week," Social Democratic Party leader Martin Schulz is pushing hard for the type of policies it is hard to imagine Merkel's CDU can accept:

The SPD leader, Martin Schulz, announced on Monday that the two sides had also reached an agreement on the European chapter of the coalition agreement that amounted to “an urgently needed signal for a fresh start for Europe”.

The agreement would commit the next German government to “more investments, an investment budget for the eurozone, and an end to the austerity mantra”, as well as “fair taxation” of internet giants such as Google, Apple, Facebook and Amazon, Schulz said via an information service for SPD party members.

Schulz has to push hard because the SPD is in real trouble. Alternative for Germany (AfD) is only a few points shy of overtaking the SPD as the second-largest party in Germany behind CDU. Katrin Bennhold explores the abandonment of the SPD for AfD by rank'n'file union members in traditional industrial strongholds.

Bennhold's story, "Workers of Germany, Unite: The New Siren Call of the Far Right," is worth reading for the insight it provides into the sway of Trump among the U.S. white working class.

Elites throughout the West are loyally wedded to neoliberalism. A particularly acute articulation of this commitment could be found over the weekend in Anna Sauerbrey's "How Millennials Are Changing German Politics":

Real politics always consists of bullet points. You want to lift up the lower middle classes? You have to pass tax relief, restructure social security contributions, bolster the education budget — which is what the next grand coalition will vow to do, if the negotiations are successful.

The challenge for German politicians, moving forward, will be to come up with a narrative big enough to create a sense of direction, of being based on values more fundamental than raising the gross domestic product a few percentage points, but avoiding the sort of utopian visions that German voters rightly distrust.

If they succeed, they could set free a new era of political energy. If they fail, we could see a dark turn toward the sort of fractured, incoherent politics haunting the rest of the world, full of holes that the far right can move through. There’s a trap, however. In raging against the slow and boring politics of compromise, the members of the new generation are joining the very populist chant they are setting out to defeat.

In other words, more compromise, cuts to social programs, no utopias -- more of the same. That's the mantra of the neoliberals. And by doing more of the same we will magically "set free a new era of political energy." This is derangement, plain and simple.

The safest bet in any book is the bet that the traditional parties of the mainstream left in the West will continue to disintegrate.

German Elections Bad News for Neoliberals

The consensus in the mainstream press is that Angela Merkel is, in the Age of Trump, the leader of the Western neoliberal world order. Her reelection was a foregone conclusion. Stories in the run up to Sunday's vote usually mentioned -- as an afterthought -- that Germany's far-right party, Alternative for Germany (AfD), would enter parliament, the first ultra-nationalist party to do so since the defeat of the Third Reich, but that it was not much of a concern since its momentum had been zapped by Merkel's shrewd swing to the right on immigration.

Well, that's not how things turned out. Yes, Merkel triumphed, but her Christian Democrats fell significantly short of their performance four years ago, as did their coalition partner Social Democrats; add to this AfD's arrival as the third-largest party in parliament, and what you get is a lot of neoliberal hand-wringing this morning, captured by Stephen Erlanger and Melissa Eddy in "Angela Merkel Makes History in German Vote, but So Does Far Right":

The far-right party, Alternative for Germany, or AfD, got some 13 percent of the vote — nearly three times the 4.7 percent it received in 2013 — a significant showing of voter anger over immigration and inequality as support for the two main parties sagged from four years ago.

Ms. Merkel and her center-right Christian Democrats won, the center held, but it was weakened. The results made clear that far-right populism — and anxieties over security and national identity — were far from dead in Europe.

They also showed that Germany’s mainstream parties were not immune to the same troubles that have afflicted mainstream parties across the Continent, from Italy to France to Britain.

“We expected a better result, that is clear,” Ms. Merkel said Sunday night. “The good thing is that we will definitely lead the next government.” 

[snip]

Ms. Merkel’s conservative bloc won some 32.9 percent of the vote, sharply down from 41.5 percent in 2013, the early results showed.

The Social Democrats slumped to 20.8 percent, a new postwar low, down from 25.7 percent four years ago.

If the Social Democrats hold to their intention to go into opposition, Ms. Merkel will be faced with an unusually difficult task to form a working coalition. Given the numbers, it would seem that she will have to cobble together her own Christian Democrat-Christian Social Union bloc together with two other parties.

The potential new partners inhabit virtually opposite poles on the political spectrum — the pro-business Free Democrats, who won some 10.4 percent of the vote, and the left-leaning pro-environment Greens, who won about 9 percent.

At the Christian Democrat headquarters, Frank Wexler, a Berliner, called the results “a bit depressing.”

Grand coalitions had allowed the small parties to gain ground, he said. “The main parties are getting smaller,” Mr. Wexler said. To counteract the AfD, he said, “We need to address the issue of strengthening the borders.”

But Mr. Wexler said he was most disturbed by the AfD’s hostility to the European Union. “This is what Germany needs to do — be a strong leader in Europe.”

But Hans Kundnani, an expert on Germany with the German Marshall Fund, said that Ms. Merkel might fail to create the three-party coalition, putting the Social Democrats under great pressure to join another coalition rather than forcing new elections.

To Mr. Kundnani, “the big shock is not the AfD,” but the loss of support for Ms. Merkel’s conservatives and the increasing fragmentation of German political life.

Moon of Alabama sees new elections in two years. Merkel has spent too much time hovering in the center and with this election she has been flanked on the right.

In the latest London Review of Books, Thomas Meany has a strong article, "In the Centre of the Centre," on the state of German politics on the eve of the election. While he didn't predict the result, I think he nails the inherent weakness of Merkel's centrism:

Many leftists and Greens, disillusioned with their own party leaders, have been stunned by Merkel’s modernisation of the CDU and her steadfastness in the first months of the refugee crisis. Too stunned, perhaps, to notice that her trick is to avoid the country’s root problems while treating the symptoms more skilfully than any conservative politician before her has ever managed. The media, meanwhile, unwilling to address the difficulties caused by Germany’s position as the reluctant hegemon of the Continent, or the growing sense of lurking inconsistencies in the gospel of Atlanticism, prefer endless celebration of the leader: the intellectual, strong, patient, grounded, wry, compassionate, tough, reality-grasping, scientific, opera-loving, Bismarckian wunder-Kanzlerin on whom nothing is lost. One of the few things the mainstream press holds against her is that she doesn’t campaign in a way that generates copy; others dislike the way she has so thoroughly depoliticised the country.

AfD's hostility to the European Union and the eurozone is an existential threat to Germany's economic hegemony. As Wolfgang Streek made clear in a piece, "Playing Catch Up," published in May --

With monetary union set up as it is, and the path to political union foreclosed not only by member states but also by their peoples, the Merkel government, like previous German governments, has only one suggestion to offer the rest of Europe: that each country catch up with Germany by subjecting itself to its own second round of capitalist transformation – ‘structural reforms’ involving the replacement of traditional forms of social solidarity with market competition and, perhaps at some later date, the embedding of competition in modern institutions of solidarity, like the welfare state and collective bargaining. For this to happen, willing governments must be kept in power, if need be through discreet suspension of democracy, since resistance to the treatment is growing on a broad front. Here, as so often in her long career, Merkel is anything but dogmatic, and certainly isn’t beholden to ordoliberal orthodoxy since what is at stake is Germany’s most precious historical achievement, secure access to foreign markets at a low and stable exchange rate. For several years now, Berlin has allowed the European Central Bank under Draghi and the European Commission under Juncker to invent ever new ways of circumventing the Maastricht treaties, from financing government deficits to subsidising ailing banks. None of this has done anything to resolve the fundamental structural problems of the Eurozone. What it has done is what it was intended to do: buy time, from election to election, for European governments to carry out neoliberal reforms, and for Germany to enjoy yet another year of prosperity.

My preoccupation -- I think about this constantly, and have for years -- is how much longer can this political-economic system stumble forward? So many times it appears on the verge of collapse, yet it always manages somehow to stay upright. Has history truly ended or are we finally witnessing the birth of a new era?

Germany's Love-Hate of the Euro

The slow-motion collapse of the eurozone continues. A recent development is the formation of anti-euro party, Alternative for Germany, to challenge German Chancellor Angela Merkel from her Right in the September parliamentary elections. Nicholas Kulish and Melissa Eddy report today in their story, "German Elites Drawn to Anti-Euro Party, Spelling Trouble for Merkel," that 

The fragile solidarity between the 17 euro-zone members has been sorely tested by the years of crisis and the growing list of bailouts. The countries needing help complain about diktats from Brussels and Berlin, while Germany and its northern allies grumble about the costs. Here in the German capital, the images of demonstrators in Athens, Madrid and now Nicosia, Cyprus — some of them waving swastikas or pictures of Ms. Merkel dressed as Hitler — have begun to try people’s patience. 

Pollsters and political analysts doubt that the new party will attract more than 5 percent of the vote, the threshold for representation in the next Parliament. But it does not need that many votes to play the spoiler for Ms. Merkel. 

“They don’t need to get 5 percent to make things very tight for the chancellor,” said Wolfgang Nowak, a fellow at the North Rhine-Westphalia School of Governance in Duisburg. “And every swastika on the street in Athens helps this new party.”

A good naked capitalism post from this past Saturday, "Why Germany (Mistakenly) Thinks it Can Kill Its Export Markets Through Austerity and Still Prosper," shows that Germany runs a deficit with Russia and Asia but racks up a huge surplus with eurozone deficit nations. The quote comes from a cross post off Yanis Varoufakis' blog:

In 2012, mostly on account of energy imports, Germany had a net trade deficit of €27 billion with Russia, Libya, and Norway. In addition, it sported a €4.7 billion trade deficit vis-à-vis Japan and a sizeable €11.7 billion trade deficit with China. In total, Germany’s trade deficit with these net exporters summed to €43.4 billion. Meanwhile, Germany’s trade surplus with the Eurozone’s deficit nations (France, Italy, Spain, Greece, Portugal, Cyprus and Ireland) came to a still staggering €54.6 billion – despite the sharp diminution of this number following the sharp decline in imports in these crisis-hit nations. 

Put differently, Germany’s net exports to the countries that the German press likes to lambast as ‘laggards’ that constitute a drain on German ‘progress’, sufficed to pay for Germany’s net trade deficit vis-à-vis China, Japan, Norway, Russia and Libya, with €11.2 billion to spare: enough to cover for the €3.4 billion transferred to German factories in the Czech Republic and in Slovakia and a large chunk of German companies’ transfer payments to their Dutch partners or subsidiaries (which are in a surplus of more than €15 billion with their German partners).

In short, despite all rumours to the contrary, German global trade surpluses are still being financed by the deficits of the imploding Eurozone ‘stragglers’. It is in this sense that Germany’s denial of the systemic nature of the Eurozone crisis, and its leaders’ commitment to the principle of ‘the greatest austerity for the weakest Eurozone member-states’, is perhaps our epoch’s most spectacular own-goal.

In the lead unsigned editorial on today's Opinion page, "Europe's Bitter Medicine," the New York Times points out, in the case of Portugal, the folly of austerity. The editorial, I think correctly, makes the case for euro bonds as a solution to the sovereign debt crisis:

In Portugal, the government of Prime Minister Pedro Passos Coelho cut spending and raised taxes so much that the fiscal deficit has fallen by about a third from 2010 to 2012. He also pushed through reforms to phase out rent control for tenants and legal changes that make it easier for companies to fire workers. The result is that the country’s unemployment rate has risen to close to 18 percent, from 12.7 percent in 2011. Economists say Portugal will likely have a bigger fiscal deficit this year than it agreed to in exchange for loans from other European countries and the International Monetary Fund, because national policies, not surprisingly, have made the recession deeper than anticipated. 

What would help is if leaders like Chancellor Angela Merkel of Germany stopped insisting on austerity and helped bolster demand by, for instance, allowing weaker countries to issue bonds backed by the euro zone. That could put more into the economies and help lift them out of a downward spiral. Policy makers in Portugal and Italy would have a much easier time selling their people on the need for reforms if they weren’t also cutting popular government programs and benefits. Faster growth and lower unemployment would provide the resources that could later be used to pay down debts and reduce deficits.