Five challenges facing Germany's new government

"We are under no illusions about the challenges we face," incoming Finance Minister Christian Lindner told reporters on Tuesday after representatives from the SPD, Greens and FDP met to give their coalition agreement the final sign-off. 

Though the 177-page document promises to build a greener, fairer future, Olaf Scholz and his new cabinet is likely to spend his first few weeks and months Chancellor responding to current crises rather than moving towards this vision. As he takes the reins from Angela Merkel, he also inherits a number of crises and challenges. 

From fears around the new Covid variant to spiralling debts, here are five of the major issues that are set to confront Germany's new government in the post-Merkel era. 

1. Taming the Covid fourth wave

As the incoming Health Minister Karl Lauterbach prepares to take the keys to his new office, Germany is busy fighting one of its most ferocious and deadly Covid waves yet. The situation became so severe this autumn that the three 'traffic light' parties were forced to put a plan of action into place before they had even entered government. So far, they've placed far-reaching curbs on the unvaccinated by introducing nationwide contact restrictions for the unjabbed and '2G' rules barring them from entering most public places. 

While infection rates seem to be sinking lightly on a national level, experts fear this could have less to do with the new measures and more to do with local authorities losing count of spiralling numbers. Most worryingly, the number of patients in intensive care wards reached 4,950 and 529 people died within a day on Wednesday, marking the highest death count since February. And since the 'epidemic situation of national importance' was allowed to expire, state governments have lost the legal basis to introduce emergency measures such as lockdowns and school closures. 

As three parties of the new coalition will no doubt understand, the Covid crisis is not just a crisis of public health, but a political crisis too.  Since the start of the pandemic, the liberal FDP have emphasised personal rights and freedom over tough restrictions - and protecting the population while respecting civil liberties has so far proved to be a tricky balancing act for the trio. 

With a vote on mandatory Covid jabs on the cards this month, the three parties have managed to avoid in-fighting by saying that MPs will be allowed to vote with their conscience rather than their party whips. However, it's hard to see how they'll avoid further alienating an increasingly disgruntled anti-vaccination minority that are not just taking to the streets, but turning up at MPs' personal homes as well.

READ ALSO: Germany’s new government condemns ‘aggressive’ anti-vax movement

2. Balancing the books 

Marrying the low-tax policies of the pro-business FDP with the ambitious spending plans of the Greens and SPD was never going to be an easy job, and many commentators have pointed out that the coalition's plans look like something a fudge so far. 

"And where is the money going to come from?" was the question posed by Spiegel after the three parties unveiled their initial plans in October. So far, neither the public nor press have been given a clear answer.

The new coalition has promised to make huge investments in infrastructure in order to digitalise the economy and transition away from coal to renewable energy in a matter of years. Plus, the government will be expected to pour more money into pensions and healthcare to deal with Germany's aging population and continue to support struggling people and businesses for the duration of the pandemic. 

Christian Lindner (FDP) is sworn in as Finance Minister on Wednesday, December 8th. Photo: picture alliance/dpa | Kay Nietfeld

With the FDP in charge of the Finance Ministry, however, there won't be any tax rises to pay for the coalition's plans, and the new government has also agreed to reintroduce the country's debt brake in 2023.

That gives the parties around a year to continue borrowing in order to invest - and comments made by Olaf Scholz on Wednesday suggest that that could be what they plan to do. But with the country wracking up more than €133 billion in debt by the end of last year, this could also be a risky strategy. 

Experts estimate that the government will need to find at least €50 billion a year to meet today's challenges -  but if the FDP continues to insisit on rigorous fiscal discipline at the expense of its coalition partners' plans, it could spell trouble for the harmony of the government.  

READ ALSO: No debt, no tax hikes: German government faces public spending paradox

3. Tackling the climate crisis

As July's devastating floods in Rhineland-Palatinate and North Rhine-Westphalia reminded us, the effects of climate change can already be keenly felt in Germany. The world has warmed by 1.1 degrees centigrade since pre-industrial times - just 0.4 degrees shy of the cap set in the Paris Agreement. Germany, however, has warmed by 1.5 degrees already, leading to volatile and extreme weather events such as the 'flood of a century' that traumatised the nation earlier this year.  

For years, the previous Merkel-led government has come under fire for shirking crucial climate protection measures such as the transition towards sustainable transport and energy. Germany has traditionally preferred to protect its world-famous car industry rather than enabling a shift towards trains, buses and bicycles - and has tended to allow local regions to place huge obstacles in the way of wind and solar power providers who are looking for sites in which to build.

Now, with the Greens gaining power, the government has pledged to build a carbon neutral economy by 2045 and source 80 percent of Germany's energy from renewable sources by 2030 - the same deadline it has set for transitioning away from coal. For the car industry, the coalition has pledged to put an ambitious 15 million electric cars on the road by 2030, which is roughly 30x the current figure of around 500,000. It will ban combustion engines by 2035. 

Wind turbines on the north coast of Germany. Photo: picture alliance/dpa | Axel Heimken

READ ALSO: E-cars and sleeper trains: How Germany’s new government will reform transport

Not only will these goals require huge infrastructure investment and co-operation from state governments and the private sector, but they also aren't plans that can be carried out overnight. Scholz and his team will have to hope they're popular enough to secure the trust of the public again in 2025 (and indeed in 2029) to ensure that the parties' climate protection plans are seen through to the end. 

4. Modernising Germany

"Germany has fallen behind in terms of digital infrastructure and the digitisation of administrative activities," Christoph M. Schmidt, President of the RWI Leibniz Institute for Economic Research, wrote in Merkur recently. For many who've felt frustrated by slow internet and patchy signal while living in Europe's largest economy, this may appear to be something of an understatement.

Over the coming years, the traffic light coalition wants to give green light to super-fast internet all over the country and pave the way for a digital revolution in public services such as healthcare and social security. "Our goal is the nationwide supply of fiber optics and the latest mobile communications standard," the coalition pact reads. Germany's network providers have been offering fiber internet to customers in some regions for a few years now, but, as with many of the last government's projects, the roll-out has been painfully slow. 

Of course, with an ageing population and migration tailing off over the past few years, an immediate challenge for the new government will be finding the talent to plug the nation's skills gap - particularly in the vital science, tech and medical sectors. To do this, the pro-immigration coalition is likely to look abroad by liberalising and fast-tracking visas for skilled workers, though this is bound to take some time. 

READ ALSO:

• EXPLAINED: What Germany’s new government means for citizenship and naturalisation
• KEY POINTS: Germany’s next government unveils coalition pact

5. Taking an assertive stance in foreign affairs

At the press conference following the signing of the new government's coalition pact in Berlin, Olaf Scholz fielded numerous questions about recent reports that Russia had sent tanks and snipers to eastern Ukraine in an attempt to provoke return fire. 

Scholz responded by reiterating his governments' pledges to try and promote a "strong, sovereign Europe" that can deal with these global challenges. "In this future world, Europe has to be able to act with strength," he said. 

Meanwhile, tensions have been rising between the EU and Belarus amid accusations that the Belarussian authorities have been flying migrants to Minsk and sending them into the bloc in retaliation for sanctions imposed on the country. According to outgoing Foreign Minister Heiko Maas (SPD), Belarus’ authoritarian leader Alexander Lukashenko is now acting as the “head of a state smuggling ring”, essentially pushing through refugees through the country on their way into Schengen. 

Annalena Baerbock sits with her husband as she is sworn in as Foreign Minister on Wednesday, December 8th. Photo: picture alliance/dpa/dpa-Pool | Kay Nietfeld

The situation brings back difficult memories of the 2015-16 migrant crisis in which Germany took in hundreds of thousands of refugees - a move that has since been capitalised on by the anti-migrant AfD and others on the far right. 

As Greens co-leader Annalena Baerbock is sworn in as Foreign Minister, she therefore faces an increasingly volatile and tense global situation. Early signs suggest that she plans to take a much more assertive stance on the world stage than her recent predecessors, while also demanding "an EU which protects its values and rule of law internally and externally". But however she chooses to position herself, it is bound to be a baptism of fire.