German Greens Want to Persuade Voters to Power Economy With Debt

Germany’s Greens are betting they can convince crisis-weary voters that now is the time to keep on spending.

The party -- Germany’s second-strongest in recent polls -- has proposed investing 500 billion euros ($600 billion) over 10 years to tackle climate change and transition to a clean economy. The investment, direct on the heels of a pandemic-related spending spree, would be financed by borrowing and taxing the wealthy and big tech companies.

To sell the idea to a country traditionally adverse to government debt, the Greens are pitching it as a growth program that almost pays for itself.

“We can have a positive impact not only on the economy but also on the budget because of gains in tax income,” Sven-Christian Kindler, the party’s budget expert, said in an interview. “The good news is that we don’t have to pay any interest rates on it,” he said, citing negative yields on German 10-year bonds.

It’s a risky gambit for the Greens, who have their best chance in years of grabbing a role in German government after elections in September. Almost any coalition scenario involves the party, and the likeliest would be an alliance with the bloc led by Angela Merkel’s Christian Democrats.

But their spending plan could complicate coalition negotiations because it would mean easing the constitutional limits on public debt by exempting net investments.

Permanently loosening the so-called “debt brake” is heresy for Germany’s conservative bloc, long a defender of balanced budgets. Even with coronavirus infections still spreading rapidly, calls from the CDU to scale back coronavirus aid have grown louder ahead of Merkel’s budget address to parliament on Wednesday and Merkel herself admitted this week that Germany can’t sustain its current level of spending on aid for struggling businesses.

While Germans generally favor more climate action, it isn’t clear how deep they’re willing to dig into their pockets, especially at a time of a fragile economic recovery when the government is already borrowing massively. The result might be the right message at the wrong time.

“We’re seeing the massive extent of public debt coming out of the crisis, and while we don’t know exactly how bad the economic fallout will be, it’s clearly a problem for the Greens,” said Hubert Kleinert, one of the first Green members of parliament and now a professor of politics in Wiesbaden. “It’s probably a reason to remain skeptical, not to become too euphoric, and certainly a reason for the Greens to think carefully how to bundle these issues -- climate and the coronavirus.”

The fault lines mirror a larger debate in Brussels over plans to tighten the European Union’s 2030 climate goal and the costs of an ambitious economic clean-up. Those issues have been caught up in Poland and Hungary’s threat to veto the bloc’s pandemic spending plan.

German Greens Want to Persuade Voters to Power Economy With Debt

The Greens are in a pivotal position, with less than a year before elections. Based on the latest polls, the environmental party and the CDU-led bloc, which will be without Merkel leading the ticket for the first time in 16 years, would have the support to form a government. An alternative could see the Greens lead a three-way alliance with the Social Democrats and the Left Party.

Voting intentions in Germany have become volatile in recent years, and it’s unclear to what extent the pandemic and its fallout will dominate the campaign. Further roiling the mix is the power vacuum in the CDU, which is in the midst of choosing a new leader for the second time in two years.

With young Germans already flocking to the party, the fallout could favor the Greens, according to Thorsten Faas, an expert in political parties at the Free University in Berlin.

The ambitious spending plan could ultimately be well-timed by providing a path into the future, and putting a realistic price tag on the climate transition could reinforce the image of the party as a serious political player, said Andrea Roemmele, professor of communication in politics at the Berlin-based Hertie School.

“It’s honest and perhaps smart to do in the wake of the corona crisis because it doesn’t look so big,” she said.

The Greens, meanwhile, will be pressing voters not to look at the costs of combating the climate crisis, but consider the risks of failing to act.

“It’s cheaper than doing nothing,” Kleinert said. “The climate crisis is becoming very expensive.”

©2020 Bloomberg L.P.

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