Foreign Affairs

Die Zeitenwende: Germany’s Coming Challenges and Opportunities

Germany has hard choices ahead. Like many other countries across the globe, the Federal Republic of Germany is currently dealing with a series of crises that threaten to upset the relative balance that has existed in the world’s fourth largest economy since the successful integration of East Germany with its Western counterpart in the 1990s. An uncertain energy future and the largest war on the European continent since World War II disrupt the German economy and society. Using a wider lens, it is evident that the republic faces these problems in the context of rising anti-globalist sentiment, worsening natural disasters caused in part by human-accelerated climate change, and increasing great power competition between the United States and China — all of which challenge the existing socioeconomic and geopolitical world order. With all of these issues bearing down, Germany now stands at the brink of a new world, one in which the nation will be forced to make a choice: Will Germany be a strong leader in Europe and champion of the liberal international order? Or will the federal republic slip into the stagnation and disunity that will increasingly threaten Europe in the coming years?

Immediate Woes

Although many of the issues with which Germany must contend extend years into the future, there are two primary areas of greatest concern: energy and security.

First, and perhaps most pressing, is the ongoing European energy crisis. This upheaval is a direct result of the Russian invasion of Ukraine and Germany’s sanctions against Russia levied in response. As an ‘unfriendly nation’ against Russia, Germany was subject first to restrictions and then, ultimately, a complete shutdown of Russian natural gas flowing into Germany. Before the shutdown, this was seen as potentially catastrophic for the country given Germany’s historical reliance on Russia for its energy needs. However, due to the rapid filling of Germany’s gas reserves via liquified natural gas (LNG), nationwide energy saving measures, and an unseasonably warm European winter in 2022, Germany, with help from a new temporary gas cap law, has thus far been able to avoid crippling price hikes.

This fortunate energy environment may not last, however. Although Germany was able to fill gas supplies for this winter, it remains uncertain from where the enormous amounts of LNG needed to fill reserves would come for next winter. To combat this problem, Germany has begun construction of multiple domestic LNG terminals, of which three have come online. Nevertheless, even with three further terminals opened by next winter, Germany will still only have processing capacity for 32 billion cubic meters (bcm) of gas — a fair distance from the 50 bcm previously imported per year from Russia.

Second, the matter of German security is now in question. After the fall of the Soviet Union and the subsequent reunification of Germany, the new Federal Republic allowed its military to degrade, feeling as though there were no more threats it had to face. However, the Russian invasion of Ukraine has dramatically altered this calculus. In response to the invasion, the German government instituted a 100 billion euro military modernization and expansion scheme to fix the problems of outdated technology and equipment and a personnel shortage. Although this massive boost in funding is undoubtedly helpful in bringing the Bundeswehr (Germany’s military) up to date, its effects will take significant time to actualize. This is in large part due to the extremely sluggish procurement mechanisms for military equipment. This problem is so serious that, as of December 2022, not a single Puma tank in the Bundeswehr was operational. Although legislation passed in the summer of 2022 aims to speed up the procurement contract process, this has thus far not been enough to revitalize the German armed forces. Berlin also does not expect to meet the 2% of GDP minimum on military spending, ostensibly required for membership in the NATO alliance, until 2027 due to existing budgetary commitments.

All these factors bring the German Defense Minister, a position commonly referred to as “the ejector seat”, under even greater scrutiny. On January 19, 2023, Boris Pistorius, the newest German defense minister, was sworn into office. He succeeded the former Defense Minister Christine Lambrecht, who submitted her resignation following strong criticism that, nearly a year after the start of the invasion of Ukraine, the German military was even weaker than it was before, due to arms shipments to Ukraine. Given Germany’s lack of a general staff, a body of the most senior military leaders within a state that advises the commander in chief, the defense minister has the sole burden of administering the bureaucratically strangled German military. The difficulty of this position is only heightened in a time when Germany’s military is in need of urgent reform and expansion. Whether the newest defense minister can effectively begin using the €100 billion fund to revitalize the military and successfully shake off the shackles of over-bureaucratization and broken procurement systems remains to be seen, but history suggests that his job will not be an easy one.

Coming Troubles

Looking ahead beyond the next few years, Germany faces more pernicious challenges to its place in the global order. 

The first of these rests in the uncertain long-term viability of the European Union. Founded in 1993 after the end of the Cold War, the EU brought together many of the countries of Europe into a peaceful, cooperative union built on the values of human dignity, freedom, democracy, equality, rule of law, and human rights. To bolster these values and ensure the reign of peace on the continent, EU leaders created a single market which enabled the free movement of goods, people, and capital across the Union. The creation of the euro, a currency shared by many countries in the EU run by the independent European Central Bank (ECB), and the establishment of the Schengen Agreement, which allows for visa free travel between most of the EU countries and some non-EU states, later augmented the single market. Over the years, the EU has also enlarged to include many of the former Soviet countries, widening the scope of the grand European project. 

Germany is considered by many to be the beating heart of the EU, as it is the bloc’s largest economy, most populous country, and the state with the most voting power in the European Parliament, one of two legislative bodies within the EU. However, the future of the European Union is uncertain. Since its inception, the bloc has been rocked by two major political crises which, alongside the aforementioned rising anti-globalist sentiments around the world, have stoked the fires of nationalism among many Europeans: the European Debt Crisis and the Migrant Crisis

First, the debt crisis occurred from 2008 to 2012. Brought on by the Great Recession, Ireland, Spain, Portugal, and, most famously, Greece all became unable to pay their government debts. This caused major economic turmoil and forced the European Central Bank (ECB) and other EU leaders to bail the affected countries out before their economic systems utterly collapsed. After the crisis eventually resolved, new measures were put in place to prevent similar future crises, such as the European Stability Mechanism, a permanent bailout fund for struggling EU countries. While the crisis may have been solved, it exposed cracks in the EU’s unity, as strong nationalist backlash to debt relief measures pushed by predominantly German monetary authorities occurred in countries such as Greece.

Second, the migrant crisis, which began in 2015 and lasted through 2016, was sparked by the mass migration into Europe of 1.3 million predominantly Syrian refugees seeking asylum from devastation in the Middle East. This rapid influx of such large quantities of people revealed that the Dublin Regulation, an EU agreement dictating that the first country to receive a migrant is the one who deals with them, was inadequate, as smaller countries such as Greece and Hungary proved unequipped and unwilling to deal with the mass flow of migrants. In response, Germany, in part to redeem historical sins, accepted over a million migrants into the country, with other countries such as Sweden taking in many migrants as well. This has since caused significant nationalist backlash in countries across the EU as voters grow increasingly concerned with matters of economic welfare for migrants and the question of cultural and religious assimilation. Although the crisis eventually abated, the Dublin Regulation has not been meaningfully reformed to account for future crises, and the question of the extent to which EU countries can either accept or reject migrants has not been settled.

The lingering effects of these two crises and the problems they have caused for European unity have left Germany, the heart of the EU, in a difficult situation.Although the EU has generated many social and economic benefits for citizens in its member states, the question remains for many countries as to whether the national sovereignty sacrificed to join the bloc is worth it. As populism and nationalism continue to rise in Europe, the future of the EU hangs in the balance.

Another challenge Germany faces is more internal: its demographic outlook. Like many other countries around the world, Germany’s fertility rate of 1.6 births per woman sits well below the 2.1 rate needed to sustain a stable population. Although the rate has increased slightly in recent years, the replacement rate in Germany is not expected to reach 2.1 potentially ever again. As it is for many countries facing the same issue, this is a problem. Countries like Japan are already beginning to face the effects of this issue: a smaller workforce, less contributors to the pension system, and decreased economic growth, to name a few. While Germany is not currently experiencing the level of issues that Japan is, if current trends continue, it is likely that similar problems will arise in Germany in the future.

Potential measures to address this issue can also create problems. In order to avoid a collapse of the pension system, one tactic is to increase the retirement age, which makes people work more years and ultimately take less money from the pension system. However, a move by the French government to increase the retirement age from 62 to 64 has recently sparked massive protests and strikes in the country, dealing serious damage to the future prospects of President Emmanuel Macron and his Renaissance party. Such a response in a neighboring country will likely make German policymakers think twice about implementing similar reforms, potentially allowing the demographic problem to worsen over time with no solutions.

Finally, a challenge not specific to Germany but rather shared by every country on Earth is addressing the climate crisis. On this issue, Germany has been a leader, setting ambitious targets for decreasing carbon emissions and planning to become carbon neutral by 2045. However, regardless of what Germany itself does, problems remain. The two most pressing of these issues are whether Germany will be able to maintain its economic competitiveness while also adhering to its emission reduction goals and how Germany and the EU would deal with potential mass migration on a scale dwarfing the 2015 migrant crisis should climate change continue and cause large parts of the Middle East to be uninhabitable.

In adapting to all of these challenges, Germany has a lot of work to accomplish, but potential strategies could set the nation on a path towards solutions.

What Can Be Done?

As with any set of problems, Germany must deal with its concerns which are most immediately pressing before pouring great effort into facing issues that exist further in the future. However, given the potentially dire nature of the problems deeper into the future, Germany must overcome its famously byzantine bureaucracy and live up to Chancellor Olaf Scholz’s promises of a new Deutschland-Tempo in order to take on the problems of today at a rapid pace.

To this end, Germany should first look under the hood of the state and address the very bureaucracy which is currently responsible for strangling quick and decisive action. Any endeavor to reform German bureaucracy should come through a three-pronged approach: digitalization, employment, and deregulation. 

First, in comparison with most other high income countries, Germany is digitally backward. From sparse credit card infrastructure to low digital literacy to, most critically, colossal stacks of paperwork in government offices, Germany is far behind where it is reasonably expected to be for a country of its size and wealth. While Germany’s Digitalstrategie released in 2022 addresses important concerns and lays out general plans for a German digital transformation, the plans have been criticized for being too broad and without a budget plan. To remedy this issue, the German government should concentrate authority over the digital transformation in fewer government cabinets than it currently does and urgently develop a budget for digitalization. At the top of the list for digital priorities should be the bureaucracy, particularly the components of the bureaucracy focused on military and energy affairs. This would smooth out the process for acquiring procurement contracts, particularly in the military where a central part of this process is overseen by the Federal Office of Bundeswehr Equipment, Information Technology and In-Service Support.

Second, Germany is currently dealing with a significant labor shortage that, particularly in the public sector, is only going to get worse. To avoid the bureaucratic process slowing down further from a lack of skilled workers, Germany should forge ahead with its effort to reform the notoriously frustrating immigration process and acquire the types of workers it needs to fill vacant positions. An aspect which could be added to this legislation is offering incentives for a smoother immigration and integration process if immigrants enter a temporary, voluntary position in the Bundeswehr to help with severe staffing shortages that currently leave certain goals of bolstering the military with “no prospect of succeeding.” Additionally, Germany could expand existing benefits for certain public employees, such as prepaid monthly public transport tickets, to cover more positions, particularly those in the military and energy sectors.

Third, certain aspects of the energy sector and the defense industry should be deregulated. While Germany has been relatively speedy in the construction and opening of LNG terminals, more must be done to meet Germany’s short and long term energy demands. On average, planning and approval for new wind turbines in Germany takes between five and six years. The process behind this should be shortened to allow timely construction of vital sources of energy. Aside from deregulating the process of building new wind turbines, any unnecessary regulations hampering the speedy completion of the 1,800km hydrogen pipeline network Germany plans to construct should also be reassessed. Finally, with respect to the Bundeswehr, the culture of overregulation, which the former Parliamentary Commissioner for the Armed Forces Hans-Peter Bartels suggests is smothering “everything and everyone,” should be reoriented by trimming down the “thousands of self-imposed regulations and rules” that the Bundeswehr sets.

With the German bureaucracy reformed, many of the short term issues that Germany faces will be solved with greater ease, speed, and efficiency. However, simply reworking the bureaucracy will not be sufficient for addressing every aspect of the issues Germany faces in the more distant future. To this end, Germany should do three things: take leadership in Europe, provide opportune conditions for families, and invest in rapid innovation for renewable infrastructure energy, including nuclear power.

On the issue of European integration and the cohesion of the European Union, Germany must take the role of the primary leader. As the largest economy in Europe, the most geographically central country of the EU, and the state with the highest population, Germany is the core state of the EU. While a certain degree of reluctance is warranted when considering expanding Germany’s role in Europe given Germany’s history in the 20th century, even nations like Poland, who bore the brunt of German aggression in the past, now call upon Germany to take the lead on matters such as supporting Ukraine against Russia. 

Although it would be unwise for Germany to send massive supplies of weapons to Ukraine given the dire state of the Bundeswehr, Germany could still take leadership in this matter by ensuring that other EU states like Poland and the Baltic countries who do send weapons to Ukraine are given favorable contracts from German defense contracting firms like Rheinmetall to refill their stocks. Germany can also assert its role as a major mediating party in future peace negotiations between Ukraine and Russia by, in tandem with allies, working to develop clear terms for peace in the conflict. Such actions have the potential to rally EU countries to one cause and potentially weaken the bonds between the anti-Putin Poland and the somewhat pro-Putin Hungary, whose right-wing populist leaders have helped each other to challenge certain democratic norms.

Building off of other renewable energy efforts, Germany should also revamp its domestic nuclear energy program. In the wake of the Fukushima meltdown in 2011, many Germans became very hostile to nuclear energy. However, this has changed in the wake of Russia’s invasion. Given Germany’s miniscule risk for earthquakes and typhoons, nuclear energy — which is clean, efficient, and reliable — is a clear path towards achieving sustainability goals. Additionally, to fully capitalize on the millions of euros the German government is putting into renewable energy research, Germany must also modernize its grid system to accommodate new forms of energy like solar and wind in high volumes.

Finally, to combat the country’s demographic decline, Germany should offer subsidies to parents for daycare and potentially other child-related goods and services like baby formula. While Germany already has a benefits system in place for families, it is important to help the increasing number of women in the workforce feel like having children is possible while also maintaining their careers, and providing cheaper daycare services is a way to accomplish this. It is also important to recognize that efforts to boost Germany’s birth rate will not fill job vacancies in the near term, which is why this effort should also be paired with immigration reform.

Germany is a country with a complex history. From an empire forged in the late 1800s to a totalitarian dictatorship to a modern liberal democracy, Germany has gone through a lot in its relatively brief existence as a unified state. However, Germany stands at the precipice of yet more change, a Zeitenwende. In the short term, the Federal Republic is faced with challenges to military readiness and energy security caused, in part, by a stifling bureaucracy; and in the long term, Germany must hold together the European Union, create a sustainable energy future, and tackle the looming issue of population decline. Whether Germany will be able to solve these complicated problems remains to be seen, but Germany’s rebirth from the scourge of Nazism and its successful reunification after the Cold War are testaments to the German ability to regroup, reorganize, and create something better than before.

1 reply »

  1. ‘Germany should also revamp its domestic nuclear energy program.’ — Connor Cowman

    Incredibly, given uncertainty about securing sufficient gas supplies for next winter, Germany shuttered its last three nuclear plants — Emsland, Neckarwestheim II and Isar II — less than three weeks ago.

    Whatever the long-term future of nuclear power may be, closing still-serviceable power plants at this fraught moment strikes many observers as tactically reckless.

    Germany’s parliamentary system does not appear to serve it very well. The three-generation military occupation of Germany by the US, which essentially dictates Germany’s defense posture, appears to have induced a state of learned helplessness and self-censorship among German leaders. Abusive US spying on former chancellor Angela Merkel elicited barely a peep of protest from Germans.

    To answer the question posed in the first paragraph, as to whether Germany will step up to lead Europe or stagnate, my vote is cast decisively for the latter option, which is de facto already in effect.


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