Will Germany Seize the Zeitenwende Moment?

Will Germany Seize the Zeitenwende Moment?

Germany has an opportunity to be a leader in Europe and NATO for the good of its people and its allies. Will it seize this moment?

 

Three days after Russia’s second invasion of Ukraine, Chancellor Olaf Scholz called the Bundestag into an extraordinary session. His speech, often interrupted by applause and standing ovations, declared a Zeitenwende for German foreign policy, a turning point moment, after which nothing is as before.

The speech rose to the moment. It was both inspiring and outlined the right policy response. But in its follow-through, Germany often looks like a nation returning to its comfort zone than one embracing the challenges of the future.

 

There are decisive actions that Germany could take (and we lay those out) to implement the promises of the Zeitenwende speech and even go beyond them. Germany can be a leader in Europe—it should seize this historic moment and realize this potential.

Germany’s Defense Dead End

Since the end of the Cold War, the rate of German defense spending has halved from 3 percent of GDP  to about 1.5 percent. Germany’s armored force, for example, shrank from 3,500 tanks in the 1980s to 225. After the end of the Cold War, Berlin spent its peace dividend on uniting East and West Germany and building a welfare state. Berlin boosted its economy with cheap Russian energy and exports to China but eschewed increases in defense capability to offset the risk of doing business with dangerous states.

This trend has alarmed allies. In a 2011 speech, Polish foreign minister Radosław Sikorski declared, “I fear German power less than German inaction…” The Trump administration, publicly and often undiplomatically, harangued Germany for not living up to its NATO promise to spend 2 percent of its GDP on defense.

In his Zeitenwende speech, Scholz promised that Germany will spend 2 percent of GDP on defense “from now on” and the creation of a $100 billion emergency fund for military procurement.

The implementation has not inspired confidence. At best, Germany may reach the 2 percent benchmark in 2025. And the $100 billion fund may be folded into annual defense funding, instead of being a spending boost that makes up for past neglect. In any case, less than 10 percent of the emergency fund will be spent in 2023.

It appears that Germany is reverting to a relaxed approach to national security. It seems comforted that Ukraine’s military has blocked Russia’s invasion, degraded its military forces, and exposed grave weaknesses in Russian equipment, leadership, tactics, and training.

Germany assumes that Eastern Europe provides it with strategic depth and that it would never have to face a Russian aggression alone. Critically, Berlin seems reassured by the United States’ and NATO’s robust support for Ukraine and reckons that they will do even more in case of an attack on Germany, a treaty ally.

It believes that NATO is a strong conventional and strategic deterrent to Russia, especially with the addition of Sweden and Finland. Germany feels safe inside NATO.

President Joe Biden has had a calming effect on German political leaders, who fretted that Donald Trump would abandon NATO and accelerate Barack Obama’s pivot to Asia. Germany recognizes that America’s pacing threat is China, but it still assumes that America will defend Europe against Russia. First because it is against U.S. interests to allow Russia, an adversary, to grow stronger by seizing European territory and destabilizing Europe. And second, because Russia is China’s only consequential ally—weakening Russia makes Moscow a less helpful partner for Beijing.

If this is Germany’s calculation, it is reasonable short-term, but it underplays serious longer-term risks. The United States will likely continue to defend both its European and Indo-Pacific interests. But if its conventional forces become stretched if faced with two simultaneous conflicts, it may decide to focus on the Indo-Pacific where China is a greater direct threat. In such a scenario, NATO’s conventional deterrence may be weaker than Germany assumes.

Further, no matter what happens to Russia’s conventional forces in Ukraine, its nuclear forces will remain on par with those of the United States and, within a decade, China too could have nuclear parity with the United States. This will put a serious limitation on U.S. involvement in extended conflicts, particularly if conventional forces are inadequate.

Germany’s calculation is also inherently risky because it lacks a good “plan B.” If Putin survives the war in Ukraine, he will build back his military and he will be back with a vengeance. But no single or combined European security force could stand up to Russia without U.S. involvement: The United States is the only true security option in Europe. The European countries closest to Russia know this and rely on the United States and NATO for their security and not on other European countries. Germany is the only European nation with enough wealth and population to potentially change this calculation through a surge of its own defense capabilities and by helping allies increase their own capabilities. By not stepping up, Germany misses an opportunity to build a stronger European pillar within NATO that could, if needed, act someday with limited or no U.S. support.

Problems with Germany’s Political Economy

Another major area affected by Zeitenwende policies is Germany’s foreign trade. For decades, Wandel durch Handel (change through trade) defined German geopolitics, especially when it came to Russia, Iran, and China. Berlin argued that large and growing trade relations with democracies can change dictatorial regimes into responsible global citizens. Germany pursued this policy with Russia even after its 2014 Ukraine invasion and up to the day of its 2022 Ukraine War.

The total failure of Change Through Trade regarding Russia required drastic changes in Germany’s energy policy. Germany had become dangerously dependent on Russian energy, with half of its gas and coal consumption coming from Russia, and a third of its oil. Germany has moved rapidly and decisively to eliminate overdependence on Russian energy. But Berlin still sticks stubbornly to green energy transition plans that have an unrealistic timetable and won’t deliver any time soon reliable, affordable, and abundant energy, let alone energy security.

Change Through Trade may also fail regarding China if Germany allows its current Beijing trade relationship to grow into a dependency. Exports of goods and services are critical to Germany’s economy, representing 47 percent of its GDP compared with only 11 percent for the United States. And China is a huge market that Germany cannot ignore, especially since it has been one of the few growing foreign markets. In particular, it represents a major destination for German auto industry exports (in 2015, over half of VW’s profits came from China) and chemical industry investments ($10 billion recent investment by BASF).

Germany actively accommodates Chinese requests for European cooperation to curry favor with Chinese authorities. The Merkel government led the negotiations for a China-EU investment agreement (over the objections of the incoming Biden administration). And the Scholz government agreed to sell to COSCO, a major Chinese shipping company, a 24.9 percent share in a terminal at the Hamburg port (despite protestations in Germany and abroad).

As U.S. policy is becoming much more hardline on China, Berlin should ask itself how long Washington will be unperturbed that one of its closest allies is Beijing’s gateway into Europe.

As with its defense policy, Germany’s relationship with China also misses an opportunity to build European solidarity as other European countries are already making the hard choice to distance themselves from Beijing for both national security and economic reasons.

Germany should be proactively reducing its dependence on Chinese business. The good news is that it can selectively disengage from China, especially if it does so over time. China currently represents only about 10 percent of Germany’s exports and foreign investments. And its exposure is concentrated in just two industries: autos and chemicals. Germany should join the United States in promoting reshoring, nearshoring, and friendshoring of its China businesses.

Importantly, the Zeitenwende moment is also an opportunity for Germany to think broadly about new sources of economic growth and to add a geostrategic dimension to this quest.

It must start with energy security. Germany needs a more realistic energy policy that recognizes that fossil fuels will remain a critical part of its energy mix for decades, way past the declared date for “Net Zero.” And it must find a place for nuclear energy, the ultimate renewable and clean energy source.

Also, Germany should be the biggest investor and supporter in the rebuilding of Ukraine, the Three Seas Initiative, and in European economic partnerships with countries in the Black Sea, Caucuses, and Central Asia regions. Germany also needs to try harder to find joint projects with Turkey, a key strategic partner.

Furthermore, Germany can expand its economic partnerships in the Indo-Pacific with Japan, South Korea, India, and Taiwan, as well as in the Greater Middle East, especially with countries party to the Abraham Accords.

Working with Free World countries around the world reduces Germany’s strategic risk, and places it on the center square of a network of prosperous and secure nations.

U.S. Interests in Supporting the Zeitenwende

The United States has an interest in Germany maximizing the opportunities created by the Zeitenwende.