German government’s response to Russia’s invasion of Ukraine – Canadian Dimension

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A Ukrainian tank during an exercise in the Dnipropetrovsk region, February 8, 2022. Photo courtesy of the Press Service of the General Staff of the Armed Forces of Ukraine.

As Russian President Vladimir Putin gathered troops near the Ukrainian border, US President Joe Biden pressured German Chancellor Olaf Scholz to reduce imports of natural gas from Russia and, specifically, that he abandons the Nord Stream 2 gas pipeline, imposes sanctions on Russia and sends arms to Ukraine. . Yet Scholz put diplomacy ahead of sanctions and slashing. With French President Emmanuel Macron, he sought to revive the Minsk agreement which had established a framework for negotiations following the Russian occupation of Crimea and the declaration of independence of the Donetsk and Lugansk regions in 2014. the wall street journal called NATO Germany”weakest link.”

Then came the turnaround: on February 22, the German government halted the Nord Stream 2 approval process. On February 26, two days after the Russian invasion of Ukraine, Germany joined the United States , Britain, Canada, France, Italy and the European Commission to impose new sanctions on Russia. The Germans have also started sending weapons to Ukraine. A day later, Scholz announced the largest rearmament program since World War II.

More weapons, less butter

During his tenure, former US President Donald Trump denounced the Germans for not paying their fair share to NATO. Then Chancellor Angela Merkel played down Trump’s demands to increase arms spending. After all, they came from a president devoid of diplomatic manners. Behind the scenes, however, the German government increased military spending, led by then finance minister Scholz. German arms spending had been on the rise since 2014, but from 2018 the increases increased every year. Before the Russian invasion, Germany had become the world champion in terms of spending growth. But that was still not enough to meet the NATO benchmark of 2% of GDP. In 2020, German military spending was 1.4% of GDP, compared to 3.7% in the United States, 2.2% in Britain and France, and 1.7% in China.

Even members of the Social Democrat caucus were unaware that Scholz had decided to increase spending enough to meet the NATO benchmark before the end of the year. They were as surprised as anyone else in the Federal Parliament when Scholz announced a 100 billion euro fund for this purpose. He did not say how the money should be spent, but the arms industry and foreign policy hawks were quick to offer their suggestions, such as restoring conscription, which the Merkel government had given up in 2010, and the acquisition of nuclear weapons as well as F-35 fighter jets.

As arms company stocks soared, fiscal policy pundits tried to understand the economics of Scholz’s spending plans. Germany is bound by the so-called debt brake, a clause in the constitution that limits public deficits to 0.35% of GDP. In an emergency, such as the coronavirus pandemic, this rule can be relaxed by a two-thirds majority in the Federal Parliament. The exemption was already in place this year before Scholz launched his rearmament plans, but going forward parliamentarians will have to decide whether rearmament constitutes some kind of permanent emergency or whether other spending can be cut to meet NATO military spending criteria and comply with the debt brake at the same time. Finance Minister Christian Lindner, a Liberal, has already made it clear that higher taxes are not an option. As the government amass more weapons, someone will have less butter.

Ukrainian Foreign Minister Dmytro Kuleba, left, and German Foreign Minister Annalena Baerbock, right, attend talks in kyiv in January. October 17, 2022. Photo courtesy of Ukrainian Foreign Ministry Press Office.

Better American gas than Russian

And the Germans will have more American gas. Perhaps. American elites have long criticized German imports of natural gas from Russia. Contrary to popular belief that trade serves the interests of trading partners and therefore trumps major power struggles, Russian natural gas is presented as a one-sided power tool in Russian hands, as if Russia does not did not depend on export earnings. At the same time, the German elites hesitated between pursuing a junior partnership with the United States and detente with the Russians.

The commodity super cycle from 2003 (coinciding with the bombing of Iraq) to 2014 made the United States a player in the natural gas market. Prices were finally high enough to lift US frac gas above break-even. However, lower production costs ensured the competitive advantage of Russian gas. Market logic had to be suspended as political pressure mounted to free Germany from its dependence on illiberal Russia. In addition to securing its power over Germany, as well as Europe more generally, the United States also wanted to sell gas.

On February 22, the German hesitations ceased, in a way. The federal government disconnected Nord Stream 2, said it would build terminals to offload liquefied natural gas from the United States and phase out imports from Russia. Not yet. Pipelines other than Nord Stream 2 continue to deliver.

In the face of soaring energy prices and insecurity over future supplies, the government is working to assure people that they need not worry. They won’t have to sit in the dark and freeze. At the same time, political and economic circles are quarreling over securing the energy supply. The most common proposal is to continue to rely on nuclear and coal-fired power plants for longer than expected. The production of nuclear energy is should stop at the end of this year; coal use is supposed to end by 2038. Installation of solar and wind capacity is accelerating. But natural gas is primarily used for heating, so gas supply shortages, if they occur, cannot be offset by additional electricity generation unless heating systems are converted. The only thing certain at this stage is the rise in the cost of energy, with no return to lower prices in sight.

Scholz-shocked

Germany’s last social-democratic chancellor, Gerhard Schröder, ordered the German air force to participate in the NATO bombing of Yugoslavia in 1999, but it stayed out of the bombing and occupation of Iraq in 2003. At the same time as the ‘Coalition of the Volunteers’ invaded Iraq, Schröder shocked his party and voters by announcing the deepest cuts to the German welfare state since the Great Depression of the years 1930. These cuts were hugely unpopular, relegating the Social Democrats to the opposition benches or the role of Angela Merkel’s junior partner until Scholz’s inauguration in December 2021. The previous election campaign was dominated by hints of a Green New Deal.While the Social Democrats and Greens, who later formed a coalition with the Liberals, have avoided the term, they have been quite open about their intentions to spend public money to contain the song climate change and guarantee a minimum of social cohesion. How they were going to raise that money despite their Liberal coalition partner’s stated intentions to abide by debt brake rules and not raise taxes was unclear.

From the start, the government seemed weak, Scholz’s approval ratings dwindled. But they exploded with his round of rearmament and sanctions against Russia. In the federal parliament, where he announced the new policy, he received standing ovations. Parliamentarians were surprised; they had not expected this change of course. But, with the exception of Die Linke and the far-right Alternative für Deutschland, they liked what they heard. The German political class was united with most of the electorate. Germany was united in NATO.

But domestic and NATO unity is unlikely to last. Skyrocketing energy prices have already sparked calls for the state to restore cheap energy supplies, sometimes coming from the same political circles that were already calling for higher interest rates to fight climate change. inflation before the invasion of Ukraine. At the time, these calls were aimed at containing what some business communities, mostly fossil capital, saw as the threat of a Green New Deal. This threat is gone. The climate change movement suffered a defeat and fossil capital made a comeback. However, enthusiasm for Ukrainian resistance to Russian invaders will wane when it becomes clear that Ukraine is a pawn in the great power game, that NATO forces are not always the good guys, and when prices high guns and gas will steadily gnaw at lows. income.

Ingo Schmidt is an economist and works as coordinator of the labor studies program at Athabasca University.

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