FREE DEMOCRATS

Liberal Leader Says German Economy is 'on Drugs'

FDP-Bundesparteitag in Berlin
Eyes on the prize. Picture source: DPA.

Every new report, it seems, brings more good news about the German economy. While much of the world grapples with uncertainty, Europe’s largest economy is near full employment, has generated a €23 billion budget surplus and is reaping a windfall from its booming exports.

But Christian Lindner, the head of the liberal Free Democratic Party (FDP), thinks it’s mostly hype. In his view, external factors such as an undervalued euro, low interest rates and falling commodity prices are the real drivers of Germany’s economic success, not underlying strength in the economy.

“In economic terms, Germany is on drugs,” Mr. Lindner told Handelsblatt. “It makes us appear stronger than we actually are,” he said.

If Germany has a drug problem, then the Free Democrats, Germany’s socially liberal free-marketeers, are preparing an intervention. Under Mr. Lindner’s leadership, the pro-business party has formulated an ambitious reform agenda to prepare Europe’s largest economy for the future. The FDP wants to liberalize the labor market, digitize government and invest in fiber-optic infrastructure to better connect medium-sized business and the self-employed, particularly those in rural areas.

Of course, true to their ideological heritage, the party wants to ax a whole array of taxes, from a tax on electricity to the solidarity tax, which was brought in after unification to fund investment in the states of former communist East Germany.

“We want to create a new balance between the citizen and the state, but it’s not just about taxes for us,” Mr. Lindner said. “We see ourselves as agents to accelerate political progress. There are enough administrators of the status quo,” he said.

“Macron proves that you can win elections with the courage to change and openness to the world. ”

Christian Lindner, FDP chief

But the FDP faces an uphill political battle in Germany’s upcoming federal elections in September. For decades, the party was the kingmaker of coalition governments, tipping the balance in favor of either the center-right Christian Democratic Union (CDU) or the center-left Social Democratic Party (SPD).

But the Free Democrats suffered a humiliating defeat in the 2013 elections and were booted out of parliament. To have any chance of implementing their agenda, they first of all have to win enough votes to re-enter parliament. Then they must build enough credibility to enter a coalition government with one of the larger parties.

It’s a tall order, but the past year has been full of electoral surprises, and developments in neighboring France have encouraged Germany’s liberals. Emmanuel Macron came from obscurity, having never held elected office, to win the French presidency on a platform of liberal economic reform. His nascent party, barely a year old, is on track to win a sweeping parliamentary majority.

“Macron proves that you can win elections with the courage to change and openness to the world,” Mr. Lindner said. “That’s good news, because in 2016, elections were won with an appeal to isolation, fear or hate.”

Under Mr. Lindner’s leadership, the Free Democrats have made a comeback. In the regional elections in North Rhine-Westphalia (NRW) in May, they won more than 12 percent of the vote and have entered a coalition government with the Christian Democrats, their traditional partners. Mr. Lindner now plans to leverage the party’s platform in NRW to set a national agenda.

The Free Democrats have a good shot of returning to the national stage. Recent polls put the party at 10 percent. But the federal election is still three months away and Mr. Lindner is taking nothing for granted. He did indicate that Chancellor Angela Merkel’s Christian Democrats remain the preferred coalition partner at the national level.

Mr. Lindner said that the Social Democratic chancellor candidate, Martin Schulz, was out of touch with the times. Mr. Schulz has proposed rolling back parts of the labor market and welfare reforms known as Agenda 2010, which many in Germany credit with the country’s current success. The Free Democrats want even more radical labor market reforms, and Mr. Lindner criticized Ms. Merkel’s Christian Democrats for defending the status quo.

“Schulz wants Agenda 1995, Merkel defends Agenda 2010, and the FDP wants Agenda 2030 – you see who we are closer to,” Mr. Lindner said.

When Mr. Schulz was riding high in the polls, Ms. Merkel’s party seemed prepared to adopt a more courageous platform, Mr. Lindner said, but since support for Mr. Schulz has collapsed, the Christian Democrats have returned to their old habits.

“The SPD will not reach the level in the polls like in the beginning of the year,” Mr. Lindner said. “It’s regrettable because as the SPD declines in the polls, the willingness of the Christian Democrats to reform also declines. We will have to fill the holes.”

The FDP and the CDU are facing their first test in North Rhine-Westphalia. Air Berlin, the ailing airline, has asked Düsseldorf for loan guarantees. For Mr. Lindner, the answer to Air Berlin and its majority shareholder, the Gulf airline Etihad, is clear.

“For me, there is no entrepreneurial perspective that would allow loan guarantees,” Mr. Lindner said. “Etihad apparently wants to unload its debts on the German taxpayer. A market economy without liability does not fly with the FDP.”

Dana Heide is a political correspondent for Handelsblatt in Berlin, focusing on the economics ministry and the Free Democratic Party. Thomas Sigmund is the bureau chief in Berlin, where he directs political coverage. To contact the authors: d.heide@vhb.de, sigmund@handelsblatt.com

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