German Social Democracy in the Great Coalition

Against the Current, No. 128, May/June 2007

William Smaldone

IN AN EARLIER article, I noted that the German Social Democratic Party (SPD) leadership’s continued catering to the needs of capital would endanger its hold on power.(1) That appraisal, however, underestimated the political skills of SPD leader and Chancellor of the Red-Green coalition government, Gerhard Schröder.

In July 2005 Schröder engineered a parliamentary no-confidence vote to force new elections in September, a year ahead of schedule. This action allowed him to launch a new electoral campaign in which, to his great chagrin, he lost the Chancellorship, but the SPD retained power as an equal partner in a “Great Coaition” headed by Christian Democrat Angela Merkel. Here I examine the impact of the September 2005 elections and the formation of the Great Coalition on the SPD and on German politics.

The elections showed that the left is far from dead in Germany. The continued strength of the Greens and the emergence of a new “Left Party” illustrate how the German political system provides space for those on the left. Their strength acts as a brake on the party’s rightward drift. Anxious to govern but concerned about alienating members and voters, both the Social Democrats and their Christian Democratic partners and rivals have been cautious in formulating policy, resulting in legislative gridlock in important areas and increased frustration within the parties and the broader electorate.(2)

In May of 2005, for the first time in almost 40 years, the SPD lost the state elections in North Rhine Westphalia, Germany’s most populous region. It was the eleventh straight defeat for the coalition parties at the state level and, although they still commanded a slim majority in the federal government’s lower house, the Bundestag, the loss cemented the opposition’s control of the upper house, the Bundesrat, which represents the interests of the states.

It became then virtually impossible for the Red-Green coalition to pass legislation without Christian Democratic agreement, and with the SPD sinking in the polls, Schröder decided to cut his losses. By calling for a vote of confidence in the Bundestag and requesting that delegates from his own party abstain, he brought down his cabinet but gained the freedom of movement that he lacked as Chancellor. Once the electoral campaign was under way, he moved leftward to mobilize his party’s support.

Running Left to Govern Right

In June 2005 the polls looked truly grim for the Social Democrats. The SPD’s support stood at 26%, the Greens at 7%, and the newly established “Left Alliance” (a coalition of disgruntled left-wing Social Democrats in the west and the Party of Democratic Socialism, the former Communist Party, in the east) at 11%. On the right, the CDU had 44%, while the Free Democrats (FDP) hovered at around 7%.(3)

The CDU-CSU’s eighteen-point lead seemed insurmountable. Yet Schröder almost pulled it off. On September 18 the SPD won 34.3%, just one percentage point behind the Christian Democrats’ 35.2%. With the FDP winning 9.8% and Greens and the Left Alliance gaining 8.1% and 8.7%, respectively, the fragmented political spectrum made a coalition of the two “people’s parties” likely.

How had Schröder and the SPD done it? First, the Chancellor virtually abandoned his reform program Agenda 2010. This package of reforms had attempted to deal with Germany’s 11% unemployment rate, stagnant growth, exploding social insurance costs, and growing fiscal insolvency by reducing taxes on capital, cutting social insurance benefits, loosening rules protecting job security, and forcing the long-term unemployed to take any job offered on pain of reduced benefits.

Schröder’s program infuriated his own constituency, but his policy appealed to the growing CDU/CSU majority in the Bundesrat. In effect, he was creating a de facto Grand Coalition to stabilize his government. The defeat in Westphalia, however, caused Schröder to rethink this strategy.

The Christian Democrats’ growing strength, pressure from within his own party, and the rise of the new “Left Alliance” made the outlook for the coming year look utterly bleak. Dissolving the government allowed Schröder to campaign in solidarity with the SPD left while accusing the Christian Democrats of promoting a neoliberal platform.(4) Meanwhile Angela Merkel’s tenuous hold on a party fraught with competition among ambitious politicians also aided Schröder’s strategy.

Merkel avoided creating a coherent party platform and agreed to a demand from the Christian Democratic prime ministers at the state level for an increase in the value added tax (from 16% to 18%) to ease their budget woes. This unpopular measure, coupled with her support for radical tax reformer Paul Kirchhof’s call to replace the progressive income tax with a flat tax of 25%, allowed the left to go on the offensive as the protector of pensioners and wage earners.

Playing on Kirchhof’s name, which means “cemetery,” Green Party leader Joschka Fischer quipped, “This is the Kirchhof in which they will bury social justice.”(5) In the end Schröder’s energy and charisma, Merkel’s lackluster performance, and her party’s programmatic confusion undercut the CDU’s commanding lead.(6)

Big Coalition, Baby Steps

Taken together, the left of center parties won more than 51% of the total vote in an election with a turnout of 77% (down from 82% in 2002). Since the SPD and the Greens were not willing to cooperate with the former Communists in the Left Alliance, it was not possible to create a coalition government based on a left-wing majority in the Bundestag.

At the same time, a potential CDU/ CSU-FDP coalition also came up short making a Grand Coalition of the two large “people’s parties” the only feasible option.

After two months of tough negotiations, the SPD and CDU/CSU formed a government with Angela Merkel, rather than Schröder, as Chancellor. Together, the two coalition parties commanded 73% of the seats in the Bundestag. With the Bundesrat also under their control, they were in a position to pass a legislative package of their choosing.

The elections showed that a majority of voters rejected the neoliberal economic policies espoused by the CDU or the FDP. The left’s division prevented it from forming a cabinet of its own, but its overall strength also made it impossible for the right to implement a radical free-market agenda. Merkel now argued for “small steps” and a “realistic” policy that would not include promises that could not be kept.(7)

Expectations were still high, however, that the new government, with such a large parliamentary majority would advance labor market reforms, redefine the relationship between the states and the federal government, restore the federal government’s finances, reform of the pension and health systems, and more.

The coalition, however, has accomplished little in any of these areas.(8) The reasons for this failure are rooted in the complexity of the country’s many problems, the conflicting interests between and within the two parties, and the changes in Germany’s increasingly volatile electoral environment.

Formulating and implementing the policy agreement that formed the basis of the coalition illustrates the extent of the problem. A massive document entitled, Together for Germany — Courageously and Humanely, the agreement calls for preserving German prosperity by taking on the challenges of unemployment, public debt, demographic change, and the pressures of globalization. Success would hinge on the coalition’s ability to carry out “structural reforms,” while restoring people’s trust in government and their willingness to make sacrifices to secure their country’s future.(9)

In practical terms, the document represents an extension of the SPD’s Agenda 2010 and a return to the de facto coalition that Schröder attempted to create three years earlier. Yet, important differences divided the partners on some key issues such as tax policy and the financing of the health system. Each party had to compromise in formulating and implementing policy goals. As they have attempted to work out the details of major reform projects, coalition leaders have found it difficult to put their general programmatic aims into practice, even in compromise form, due to the withering criticism from within and without.

Health Care In Trouble

No issue better illustrates the difficulties faced by the government than the reform of health care. The German medical system currently provides a high level of care for all citizens.  While the independently wealthy can purchase private insurance, most wage and salary earners must be a part of the national health insurance system.

Workers pay 7% of their gross income into publicly and privately administered Krankenkassen or sick funds, which then pay doctors or hospitals as necessary. Employers must pay 6% of their employees’ salaries into the funds. In recent years, as the population has aged, medical costs have risen and strained the system’s finances.

Increasing capital’s contributions to the system, business leaders argue, would make it more difficult for German firms to compete internationally. Raising labor’s share, meanwhile, would increase workers’ already heavy burden.  No major party has been willing to stress privatization as a solution. Traditionally, however, the CDU has been more willing than the SPD to shift the costs onto the workers.

Under Schröder the government reduced health benefits, introduced modest co-payments for adults, and talked about the need for more “personal responsibility,” but more recently the SPD, pushed by the left, has argued for a “citizens insurance system’ (Bürgerversicherung) that raises income by incorporating millions of government and privately insured people into the system and by shifting its funding from individual contributions to tax revenue.

At the outset the coalition partners agreed that the central goal of the reform was to reduce the level of workers’ and employers’ contributions to the system while maintaining quality services. The CDU was willing to accept a shift toward tax-based financing and both parties hoped to increase competition among the Krankenkassen as a means of improving efficiency.

After a year of negotiations, however, the “new” medical system looked much like the old one.  Efforts to increase revenues by incorporating the privately insured and raising taxes foundered on the determined resistance of powerful insurance companies and the CDU/CSU prime ministers. Fearing new taxes and insurance premiums with elections approaching, the latter forced Merkel to reverse course on the tax proposals and to put off implementation of the new premiums until 2009.

Thus, after much haggling, the reform process had brought little.(10) The health care debacle exemplifies much of the coalition’s work in other areas. Reforms of the previous government’s badly implemented and confusing labor market reforms have gone nowhere, and proposals for the introduction of the minimum wage have bogged down. In the area of pension reform, efforts to hold down the cost of mandatory contributions have failed and next year workers will see their payments rise to 19.9% of their gross income.

An increase in the value added tax will also add to workers’ woes. Reliance on such indirect taxes, agreed to when the coalition was formed, contradicts a traditional Social Democratic principle, but the party hoped that by making such a concession, it would be able to make gains in other areas. So far, it has little to show for its efforts.(11)

Declining Membership

The SPD’s continuation of the Agenda 2010 within the framework of the Grand Coalition has accomplished little. In the fall of 2006, after one year in office, only 19% of the public indicated its satisfaction with the government’s work.  CDU/CSU popularity plunged from 41% to 30%, but the SPD’s relative polling strength (hovering in the low thirties) was not much to crow about.(12)

The party leadership’s political direction also did nothing to stem the dissatisfaction of many rank-and-file members.  By October 2006 SPD membership had slipped to 568, 000, a loss of about 100,000 since 2004, and 40% below the membership level of 1990.(13) This decline of dues-paying members is ruinous for the party’s morale, for its finances, and ultimately for its paid staff.

The loss of membership is due to many factors. Historically rooted in Germany’s industrial milieu, Social Democracy depended on worker activists to build its cultural and political organizations and serve as foot soldiers for electoral campaigns. The decline of communities based on heavy industry and the rapidly falling proportion of blue-collar (and heavily unionized) workers in German society undercut an important part of the Social Democratic base.

At the same time, the SPD paid little attention to the rise of the “post-materialist” generation, which opposed NATO’s military buildup and was concerned with environmental issues, gender equality, and grassroots democracy. This error opened the door to the Green Party, which, since entering the Bundestag in 1983, has consistently won 5%-10% of the vote despite the SPD’s belated willingness to take environmental and gender politics seriously.(14)

Competition on the SPD’s left has intensified with the recent rise of the Left Party. This party’s electorate consists largely of PDS-oriented voters from the former German Democratic Republic. Its base grew in the west, however, after the SPD introduced the Agenda 2010. A substantial number of internal opponents, including former party chairman Oscar Lafontaine, then quit and set about organizing an alternative electoral force.  It was this group that allied itself with the PDS to put the “Left Alliance” over the top to win 8.7% in the 2005 elections.

Now reorganized as the “Left Party,” these forces have opposed the neoliberal, anti-labor policies of both the Red-Green and Grand Coalitions, but had difficulty articulating a positive alternative program.(15) The new party will be debating its program this spring.  Draft documents stress its commitment to “democratic socialism” and to the idea that “freedom, social security, democracy, and socialism condition one another.” What the concrete goals of the program will look like remains to be seen.(16)

Courting the Middle Class

The SPD seeks to broaden its support among the middle classes while holding onto long-time supporters. Achieving these aims in a context in which the post-1945 social consensus is crumbling, and in which Germany faces intense economic international competition, is no small challenge. Having abandoned the fight against capitalism in the 1950s, the party worked to tame the system by expanding the social safety net, providing a wide-range of affordable public goods, regulating capital, and winning a seat for labor at the bargaining table and in the boardroom (co-determination).

In the post-Cold War, neoliberal age, however, the “social” part of Germany’s famed Social-Market economy has come under intense pressure. The goals of Schröder’s Agenda 2010, now being pursued by the Grand Coalition, aim to shore up parts of the system by making concessions to capital, concessions that many party members find unacceptable.

To assuage its disgruntled base and win new supporters the SPD leadership has called for state policies that would secure the core elements of the welfare state while making substantial new investments in education, science and research, and children. In the view of leaders such as Vice Chancellor Müntefering, such an approach is essential to sustain Germany’s modest economic recovery of 2006 and to lay the foundation for the future.(17)

Many Germans surely agree that such investments are important, but average Germans see the world much differently than their leaders see it. People are aware of the growing social polarization. In one recent study, two-thirds of 3,000 participants claimed to be anxious about recent social changes, 46% said that life is a “constant battle,” and 44% said that they felt abandoned by the state.

Amidst recent debates about the rise of an “underclass” and “new poverty,” half of those questioned saw their living standards under threat, while 61% noted that the “egalitarian middle-class” society of the 1960s and 1970s has given way to one divided between those at the top and those at the bottom. Well over half the respondents also said that it “does not matter which party one votes for, nothing changes.” Two-thirds asserted that the politicians are unconcerned with their needs. Clearly the sense of alienation and anger in the republic — especially in the impoverished east — is growing.(18)

This discontent is certainly felt within the SPD. In October, for example, in a small town of 1,500 people in the state of Schleswig Holstein, all 19 members of the party local, including the mayor, resigned in protest against the SPD’s policies. Describing the leaders as “arrogant and ignorant,” the former comrades expressed their frustration with the labor and health reforms, the tax policy of the state government, and the fact that their leaders “are just not up to the task.”(19)

As the party’s grassroots membership crumbles, its one-time close trade union allies are no longer sure with whom to do business. Last spring, at the 18th Congress of the powerful German Trade Union Federation (DGB), Merkel and Müntefering could barely make themselves heard over the rude shouts from their audience, and union leaders rejected virtually all labor-market and social insurance reforms proposed by the coalition.(20) Charging that the Social Democrats “do nothing for us,” some union leaders are inclined to build ties with the Left Party, while others are even willing to talk with the CDU if its labor policies prove to be any better!(21)

Factions at the Top

In the SPD’s upper echelons factional struggles are also apparent. The new top man since May 2006 is the popular Prime Minister of Rhineland Pfalz, Kurt Beck. Not known for vision or ideological commitment, Beck faces the tough task of halting the fall in membership and reuniting the party. He appears willing to reach out to the left to do so.  In discussion of the new party program, he has worked to reinsert left positions rejecting the use of atomic weapons and stressing solidarity and social security for all citizens.  He seems intent on listening with respect to the full range of the party’s voices.  Beck, unlike Schröder, visited the party’s youth leader soon after his election.(22)

While Beck may make some concessions to the SPD left, it is unclear what will emerge from the programmatic debate.  Pushed by external rivals to its left and pulled by the desire to govern, the SPD is riven by ideological disputes about how to win power and resolve Germany’s pressing problems.

Despite its move to the center and signs of “convergence,” Social Democracy’s program and policies can never be the same as those of the Christian Democrats because a party must be able to develop its own, recognizable profile.  But to attract committed members the SPD must develop a meaningful identity that gives people hope.  The debate about the party’s new program and its direction will have implications across the continent.


  1. Against the Current 112 (September/October 2004): 30.
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  2. For recent analyses of the elections and their aftermath see  Christopher S. Allen, “The Road to 2005: The Policy of Economic Modernization,” and Charles Lees, “The German Party System(s) in 2005:  A return to Volkspartei Dominance,” German Politics, 15, 4 (Dec. 2006): 347-360 and 361-375, resp; as well as the special elections issue of German Politics and Society, Issue 78, vol. 24, No. 1 (Spring, 2006).
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  3. “Schröder Hopes to Repeat 2002 Miracle,” The Atlantic Times 2, 7(July 2005): 1.
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  4. See Agenda 2010. Deutschland bewegt sich. Aktualisierte Neuauflage 2004 (Berlin, 2004); Tina Hildebrant and Bernd Ulrich, Nerventest im Nachwahl Poker,” Die Zeit 40 (29 Sept., 2005): 3; Wolfgang Streeck, “A State of Exhaustion: A Comment on the German Election of 18. September, The Political Quarterly 77, 1 (Jan.-March, 2006): 80-81.
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  5. Streeck, Ibid, 82-83.
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  6. Manfred Güllner, “A Changing Party Landscape,” Atlantic Times 2, 10 (Oct. 2005): 2.
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  7. Theo Sommer, “With Optimism Into the New Year,” The Atlantic Times 3, 1(January 2006): 1.
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  8. Jan Fleischhauer, et. Al., “Die große Enttäuschung,” Der Spiegel 38 (Sept. 18, 2006): 24-26; Petra Bornhöft, et. Al., “Berliner Weschselphantasien,” Der Spiegel 39 (Sept., 25, 2006): 24-27.
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  9. Gemeinsam für Deutschland—mit Mut und Menschlichkeit, Arbeitsschwerpunkte der Großen Koalition, Fakten und Argumente, (Berlin, 2005), 4.
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  10. Markus Feldenkirchen, “Eins plus eins = null,” Der Spiegel 38 (September 9, 2006): 28-42; Katherina Schuler, “Operation Misslungen,” Die Zeit Online,” October 5, 2006.
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  11. Fleishhauer, et. Al., Die Große Enttäuschung, 24-25.
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  12. Ludwig Greven, “Gefährlicher Absturz,” Die Zeit Online, October 6, 2006; Bruno Waltert, “No Profile Permitted.  Opinion Polls Punish Chancellor Merkel,” The Atlantic Times 3, 9 (September 2006): 1.
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  13. Focus Online, October 16, 2006.
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  14. The rise of the Greens is treated in detail in Andrei S. Markovits and Philip S. Gorski, The German Left: Red, Green, and Beyond (Oxford and New York, 1993). See also Geoff Ely, Forging Democracy, The History of the Left in Europe, 1850-2000 (Oxford and New York, 2002), 420-21, 483-86.
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  15. Michael Koss and Dan Hough, “Between a Rock and many Hard Places: The PDS and government participation in the Eastern German Länder,” German Politics 15, 1(March, 2006): 73-98.
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  16. Die Linke. PDS Auslandsbulletin, 5 (December 2006): 2.
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  17. Interview with Tina Hildebrant and Jan Roß entitled, “Kleinkarierter Mist,” Die Zeit Online, October 19, 2006 and Gemeinsam für Deutschland, 2.
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  18. Ludwig Greven, “Leben als Kampf,” Die Zeit Online, October 17, 2006.
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  19. André Paul, “Tschuß Genossen,” Die Zeit Online, October 11, 2006.
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  20. Markus Siever, “Gäste nicht wie Gäste behandelt.  Rüde Debattenkultur auf dem DGB- Bundeskongress,” Neue Geselllschaft/Frankfurter Hefte, 7&8 (2006): 23-26.
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  21. Honrand Knaup, Michael Sauga, “Ihr tut nichts für uns,” Der Spiegel 47 (Nov. 11, 2006): 54-56.
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  22. Horand Knaup, “Kummern und Kungeln,” Der Spiegel 49 (Dec. 12, 2006): 40-42.
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ATC 128, May-June 2007