SEM 8: Germany since 1990: politics, society and the economy

Seminar questions:

What have been the most important developments in German political, social and economic life since 1990? What have they shown about Germany?
- Political
  - Reunification and Integration into the EU:
    After reunification in 1990, Germany played an increasingly central role in European affairs. The Treaty of Maastricht (1993) and the adoption of the euro (1999) cemented Germany as a leader in EU policymaking.
    - Germany played a crucial role in managing the 2008 financial crisis and the Eurozone crisis, often advocating austerity measures for struggling EU economies like Greece.
  - Chancellorship of Angela Merkel (2005-2021):
    Merkel’s tenure was marked by stability, pragmatism, and crisis management, shaping Germany as a global leader.

o Example: Merkel’s response to the 2015 refugee crisis, where she welcomed over a million refugees, was both praised and criticized. It led to shifts in German politics, including the rise of right-wing populism.

Rise of Populism and Political Fragmentation:
The emergence of the far-right party Alternative for Germany (AfD) reflected growing dissatisfaction with immigration and globalization, especially in Eastern Germany.

o Example: In the 2017 federal election, the AfD entered the Bundestag for the first time, marking a significant shift in German politics.

Social
- Demographic Shifts and Immigration:
  Post-reunification, Germany saw a declining birthrate and an aging population, leading to labor shortages. Immigration became a key solution, particularly after the 2015 refugee crisis.
  - Example: By 2020, nearly 26% of Germany’s population had a migrant background, influencing debates on national identity and integration.
- Changing Attitudes Towards National Identity:
  Postwar Germany was cautious about nationalism due to its history, but younger generations have embraced a more confident national identity.
  - Example: The rise of multicultural festivals and national pride in events like the 2006 FIFA World Cup showcased a new sense of unity.
- Social Movements and Progress:
  Issues like LGBTQ+ rights, gender equality, and climate activism gained momentum.
  - Example: Germany legalized same-sex marriage in 2017 and has been a leader in environmental movements like Fridays for Future
Economic
- Reunification’s Economic Impact:
  Integrating East Germany into the West was costly, requiring heavy investment. The solidarity tax helped fund Eastern infrastructure but also caused resentment.

o Example: By 2020, Germany had invested over €2 trillion in Eastern Germany, yet wage gaps and lower economic productivity persisted.

Hartz Reforms and the Rise of a Strong Economy:
The early 2000s saw high unemployment, leading to Chancellor Gerhard Schröder’s Hartz reforms (2003-2005), which restructured welfare and labor markets.

o Example: By the 2010s, these reforms helped make Germany Europe’s economic powerhouse, but they also increased job insecurity and the gig economy.

Environmental and Energy Policy:
Germany’s Energiewende (energy transition) aimed to shift from nuclear and fossil fuels to renewable energy.

o Example: By 2021, renewables accounted for nearly 50% of Germany’s electricity, but dependence on Russian gas remained an issue until the 2022 Ukraine crisis.

What impact did German reunification have on the Federal Republic’s politics, society and economy?
- Political Impact
  - Shift in the Political Landscape:
    - Reunification led to the expansion of the German parliament and changes in party politics, as Eastern voters had different political leanings.
      - Example: Eastern Germany initially favored left-wing parties like the Party of Democratic Socialism (PDS), later integrated into Die Linke.
  - Federal System and Policy Adaptation:
    - The need to integrate the former East into the federal system resulted in increased government spending and policy adjustments.
      - Example: The Grundgesetz (Basic Law) was extended to Eastern Germany, bringing democracy and market-driven policies to the region.
- Social Impact
  - East-West Divide in Identity and Perceptions:
    - Despite political reunification, social integration remained slow. Many East Germans felt like "second-class citizens" due to economic disparities and cultural differences.
      - Example: "Ostalgie" (nostalgia for East Germany) persists among some former GDR citizens who miss certain aspects of socialist life, such as job security and childcare policies.
  - Population Decline and Migration:
    - Many Eastern Germans migrated to the West for better job opportunities, leading to depopulation in some Eastern regions.
    - High rate of female immigration to West GER -> leading some areas to be male dominated + had declining birth rates
      - Example: Cities like Leipzig and Dresden have grown, but rural areas in the East still struggle with population loss.
  - Generational Differences
    - Younger Germans, born after reunification, feel a stronger sense of unity, whereas older generations often remember the division more acutely.
      - Example: Surveys show younger Germans are less likely to identify strongly as "East" or "West" Germans
- Economic Impact
  - Cost of Reunification:
    - The estimated cost of reunification has exceeded €2 trillion, covering infrastructure improvements, social welfare, and economic aid.
      - Example: The "Solidarity Surcharge" (Soli), introduced in 1991, remained in place until 2021, with debate over whether it was still necessary.
  - Persistent Economic Disparities
    - While significant progress has been made, Eastern Germany still lags behind in productivity, wages, and corporate presence.
      - Example: In 2021, wages in the East were still about 80-85% of those in the West.
  - Emerging Economic Opportunities:
    - Some Eastern cities have transformed into economic hubs, attracting tech companies and startups.
      - Example: Leipzig has become a major center for BMW and Porsche manufacturing.

What other forces have influenced the development of German politics, society and the economy since 1990? What changes have they brought about?
- Globalization: Germany’s export-driven economy has benefited from globalization, with companies like Volkswagen, Siemens, and SAP becoming global leaders. However, globalization has also led to job outsourcing and economic inequality.
  - Automotive + pharmaceutical energies
- Rise of Populism: AfD’s emergence in response to the refugee crisis and economic grievances in the East has reshaped German politics. Their growing presence in the Bundestag reflects growing polarization
  - Rise of nationalism? -> relation to migration policies
- Ukraine Invasion
- Immigration crisis
- Aging population -> applies pressure on pension system + labour markets - turning to immigration to counter labour shortages
  - Over 25% of GER have migrate backgrounds
- Reconciliation with GER past
- Political movement towards neo-liberal economics

How important has it been to the Federal Republic to have, in Angela Merkel, a Chancellor from East Germany?
- Bridge the E & W
  - Merkel symbolised reunification in leadership
  - Her pragmatic, cautious style resonated well with both E & W GER
- Crisis Management
  - Navigated multiple crises -> financial crisis 2008 + Eurozone crisis + 2015 refugee crisis
- International influence
  - Leadership solidified GER as global stabiliser particularly in NATO + EU

Has Germany changed since 1990 in ways people did not expect?
- Continued East-West Divide: Many expected full economic and social integration, but disparities remain in wages, employment, and political attitudes.
- Germany as a Global Power: Germany’s postwar pacifism shifted toward a more assertive international role, especially in EU leadership and diplomacy.
- Environmental Challenges: While Germany led in renewable energy, the transition from coal and nuclear has been more difficult than expected.
- Rise of Right-Wing Populism: Many did not foresee the resurgence of nationalist movements post-1990.

How successful is Germany today in the fields of politics, society and economics?
- Political Success and Challenges
- Successes:
  - Stable Democracy and Rule of Law:
    - Basic Law (Grundgesetz) has provided a strong foundation for democratic governance since 1949.
    - Unlike some EU nations experiencing democratic backsliding (e.g., Hungary and Poland), GER has maintained high levels of press freedom, judicial independence, and political accountability.
  - European Leadership and Diplomacy:
    - Plays a crucial role in EU, NATO, G7/G20. Has led efforts in econ policy, climate change, & security.
    - Took a strong stance against RUS invasion of UKR (2022) by supporting sanctions and increasing defence spending—marking a shift from its historically cautious military policy.
  - Crisis Management:
    - Handling of the 2008 financial crisis helped stabilize the Eurozone
    - Merkel’s response to COVID-19 pandemic was widely praised, with strong public health measures and economic relief programs.
- Challenges:
  - Political Fragmentation and Rise of Populism:
    - Rise of AfD has introduced R-W nationalism into GER politics. AfD has gained traction, particularly in E GER , over issues like immigration and Euroskepticism.
    - Coalition governments have become more complex, making decision-making slower. The 2021 election led to a three-party coalition (SPD, Greens, and FDP) for the first time in decades.
  - Declining Global Influence?
    - While Germany remains a leader, its reluctance to take on a stronger military role and its slow response to global crises have been criticized.
    - Some argue France’s Macron has taken a more active role in EU affairs, overshadowing GER leadership.

Social Success and Challenges
Successes:
- Immigration and Multiculturalism:
  - Embraced immigration, particularly since 2015 refugee crisis, when over 1 million refugees arrived.
  - Labour market has benefited from migration, with many immigrants filling labour shortages in industries like healthcare and construction.
- Social Progressivism:
  - Same-sex marriage was legalized in 2017.
  - Women’s participation in politics & WF has increased significantly. Angela Merkel’s 16-year chancellorship symbolized progress in gender equality.
  - Climate activism, led by movements like Fridays for Future, has pushed GER to adopt stronger environmental policies.
- High Standard of Living:
  - GER consistently ranks high in quality of life indices, with universal healthcare, strong laboyr protections, and a well-developed welfare state.
  - Cities like Munich, Hamburg, and Berlin are among the most livable cities in the world.

Challenges:

Integration Issues and Xenophobia:
- While Germany has accepted large numbers of immigrants, integration remains a challenge. Some communities struggle with language barriers, employment opportunities, and discrimination.
- The rise of far-right extremism has led to increased hate crimes, particularly against Muslim and Jewish communities.
Aging Population and Workforce Shortages:
- Germany has one of the oldest populations in the world, with a median age of over 45. This puts pressure on pensions, healthcare, and the labor market.
- Gov has introduced policies to encourage skilled migration, but it remains a long-term challenge.
East-West Divide Still Exists:
- Despite reunification efforts, Eastern Germany still has lower wages, higher unemployment, and less political influence than the West.
- Many Eastern states have seen higher support for populist parties like AfD, reflecting dissatisfaction with economic and social progress.

Economic Success and Challenges

Successes:
- Europe’s Economic Powerhouse:
  - GER is world’s 3rd largest exporter, with strong industries in automobiles (Volkswagen, BMW, Mercedes-Benz), manufacturing (Siemens, Bosch), and chemicals (BASF, Bayer).
  - Hartz labour market reforms (2003-2005) helped reduce unemployment making GER more competitive.
  - Despite COVID-19 , GER economy rebounded quickly due to strong gov stimulus & resilient industries.
- Strong Fiscal Policies:
  - GER has maintained low inflation, budget surpluses, and stable econ growth compared to many EU
  - The Schwarze Null (Black Zero) policy prioritized balanced budgets, making Germany financially strong.
- Green Energy Leadership:
  - The Energiewende (Energy Transition) policy has made Germany a leader in renewable energy.
  - By 2022, nearly 50% of Germany’s electricity came from renewables (wind, solar, hydro).

Challenges:

Energy Crisis and Dependence on Russian Gas:
- Before 2022, Germany relied on Russia for over 50% of its gas imports.
- UKR war forced GER to rethink its energy strategy, leading to rising energy prices and inflation.
- Nuclear power phase-out (completed in 2023) has sparked debates on whether GER should have kept nuclear energy as a backup.
Digitalization and Innovation Gap:
- GER lags behind in digital transformation, with slow internet, bureaucratic inefficiencies, and low investment in tech startups.
- Compared to Silicon Valley (USA) or Shenzhen (China), Germany has fewer global tech leaders.
- The automobile industry is struggling to transition to electric vehicles (EVs) due to competition from Tesla and Chinese manufacturers.
Export Dependence and Global Risks:
- Germany’s economy is highly dependent on exports, particularly to China and the EU. A slowdown in global trade could hit Germany harder than other economies.
- The US-China trade war and geopolitical tensions have increased uncertainty for German businesses.