How Has the Russia-Ukraine War Impacted Germany’s Renewable Revolution?

Sören Amelang

The energy crisis fueled by Russia’s war against Ukraine is dealing a heavy blow to Europe’s biggest economy Germany, due to its large dependence on Russian fossil fuels. Policymakers, businesses and households alike are struggling to cope with skyrocketing prices, which are fanning fears of irreparable damages to the country’s prized industries, economic hardships for its citizens, and social unrest. The long-term impact on the country’s landmark energy transition remains uncertain, as Germany redoubles efforts to roll out renewables, but also bets on liquefied natural gas (LNG), a temporary revival of coal plants and a limited runtime extension for its remaining nuclear plants to weather the storm. This article provides an overview of the state of play of Germany’s shift to climate neutrality, which is now dominated by its response to the crisis. It will be updated regularly. [UPDATE: Government earmarks 83 billion euros for gas and power price subsidies.]

What’s the energy crisis’ impact on the economy and households?

+ The energy crisis is set to push Germany into a recession, as rising energy prices put a damper on industrial production and inflation means citizens will buy less. Both the government and the country’s leading economic research institutes expect the economy to shrink in 2023. The government forecasts an inflation rate of 8 percent in 2022, and 7 percent in 2023.

+ Many German industrial companies have relied on cheap Russian pipeline gas, among them key producers of basic materials needed for many other products. These firms are particularly concerned about the energy crisis, as permanently higher gas prices threaten competitiveness and long-term survival.

+ The government has launched massive relief packages for citizens and companies (see below). Without these, many households would face additional energy costs running into thousands of euros per year, with retail gas prices multiplying for many citizens, and retail power prices also rising steeply.

+ Policymakers, consumer protection groups, and social care services have warned that the energy price hike could result in social hardships and even unrest if households are overburdened. But so far, protests have remained limited in scope and scale, and mainly limited to regions notorious for their rejection of government policies.

+ Most citizens blame the energy price hike on external factors such as the pandemic and the war on Ukraine, and generally approve of the government’s handling of the crisis, according to surveys. They also say that they are ready to contribute to energy savings. But rising prices have become the biggest concern for a vast majority of the population.

How has the government responded?

+ Germany has responded to the crisis with a whole series of relief packages for households and businesses, which have continuously grown in size and scope. The government presented a 200-bln euro “defence shield“ in September, which includes plans for reducing gas and electricity prices at a projected cost of 83 billion euros. Previously, it had already earmarked about 95 billion euros in support funds, spread out in three relief programmes, which included petrol tax cuts, a 9-euro flat-rate ticket for public transport, and a temporary freeze of the CO2-price for transport and buildings, which was meant to rise in early 2023.

+ The government urged citizens to save energy, ordered savings in public institutions, and helped to fill gas storages in order to avoid shortfalls in the winter. [The grid agency provides daily updates on the current status of Germany’s gas supply.]

+ To bring down the use of gas power plants, the country is temporarily reviving coal units that had already been retired, or were earmarked for decommissioning.

+ The country will also postpone its exit from nuclear energy by around three months, by keeping its remaining three operating nuclear plants on the grid until April 2023.

+ Germany is going full steam ahead in building up its own import infrastructure for liquefied natural gas (LNG) and increase trading or make new deals with other suppliers in order to replace Russian pipeline gas.

How will the crisis affect Germany’s shift to climate neutrality?

+ Many experts and the government hope that while the crisis might result in a short-term increase in emissions, it will ultimately speed up the energy transition. Germany’s overall energy transition and emission reduction targets remain in place.

+ The war has re-energized efforts to shift away from fossil fuels towards renewables, which have been dubbed “freedom energies” because they allow the country a greater degree of independence from Russia. But the increase in raw material and financing costs also threatens to slow the renewables roll-out, as investors become more reluctant.

+ Despite the short-term increase of coal use, the government is still planning to pull the country’s coal exit forward, “ideally” to 2030, from the currently legislated end date of 2038. However, while some coal regions have committed to the 2030 phase-out goal, others have said an early exit is too ambitious.

+ Environmentalists warn the government’s large LNG infrastructure investments could cement fossil-fuel dependency.

+ German industry has said it plans to stick to its existing decarbonisation targets despite the challenges posed by the energy crisis.

+ Household demand for low emission heating systems such as heat pumps has risen strongly in response to the crisis, challenging the dominance of gas-fired heating systems in German homes.

What’s the overall status of Germany’s energy transition?

+ There is a broad consensus among policymakers, businesses, and climate activists that speeding up the rollout of renewables must currently be Germany’s top priority to advance the energy transition, because they will also be key to electrifying other sectors such as transport and heating, and the country’s plans for a hydrogen economy.

+ Renewables provided 49 percent of Germany’s electricity in the first half of 2022, but total emissions are forecast to rise slightly this year because of higher coal use.

+ There are concerns that a lack of skilled workers will become a major obstacle to rapid energy transition progress.

Could China Help Brazil to Overcome Its Economic Crisis?

Marco Fernandes

The election victory of Luiz Inácio Lula da Silva as the president of Brazil for a third term on October 30 is expected to revise the relations between Brasília and Beijing. Brazil is going through a serious economic, political, social, and environmental crisis. Fighting poverty, resuming economic growth with income redistribution, reindustrializing the country, and reversing environmental abuses are urgent tasks, which will demand unprecedented national and international finesse from the new government. The economic partnership between Brazil and China, which has advanced greatly in the last two decades, may be one of the keys to reversing the crisis that Brazil faces. But some challenges will need to be faced with diplomacy and strategic planning.

Despite the “insults” directed by the government under former Brazilian President Jair Bolsonaro toward China, especially during the pandemic, and the inevitable distancing of diplomatic relations between the two countries, bilateral trade between Brazil and China has increased. In 2021, bilateral trade between the two countries reached $135.4 billion with Brazil recording a trade surplus of $40 billion with China, which was only surpassed by the region of Taiwan and two countries, Australia and South Korea. China has been Brazil’s largest trading partner since 2009, accounting for almost double the trade volume that Brazil imported from its second largest partner in 2021, the U.S. ($70.5 billion), with which it recorded a deficit of $8.3 billion.

A Profitable, but Unbalanced Trade Relationship

Brazil’s export mix, however, is vulnerable in the long term: it is not very diversified and based on products of low aggregate value. The four main products it exports (iron ore, soy, crude oil, and animal protein) accounted for 87.7 percent of total exports to China in 2021. Meanwhile, the imports of Chinese products to Brazil are highly diversified, with a predominance of manufactured products, and with a high technological index. For example, the main import item from China to Brazil (telecommunications equipment) accounted for only 5.9 percent of imports.

The Brazilian commodities sector, which is an important component of the economy, represented 68.3 percent of exports by Brazil in the first half of 2022 and has contributed for years to the increase in international reserves. On the other hand, the commodities sector has a high concentration of wealth, pays few taxes, generates relatively few and low-skill jobs, is subject to cyclical price changes, and, in many cases, causes environmental damage, which needs to be better controlled by the state. In this sense, the initiative announced by COFCO International—the largest buyer of Brazilian food in China—to monitor and prohibit the purchase of soybeans planted in areas of illegal deforestation in Brazil beginning from 2023 was important.

But it will also require the Brazilian state—which has become notorious in recent years for encouraging deforestation and the invasion of Indigenous reserves—to guarantee the effectiveness of the initiative. China needs Brazil’s natural resources for its development, and Brazil needs the Chinese market for its commodities. But in the medium and long term, Brazil will need to seek greater balance in its trade agenda if it wants to return to being a solid economy. Let’s remember that in 2000, the main Brazilian export product was Embraer’s jet planes, while in 2021, the main exports were iron ore and soybeans. This is just one of the many symptoms of chronic deindustrialization.

Investing Is Necessary but so Is Diversifying

Chinese investments in Brazil have a similar profile to its exports: robust, but not very diversified. In 2021, Brazil received the most Chinese investments in the world, amounting to $5.9 billion (13.6 percent of the global total). Between 2005 and 2021, Brazil was the fourth-largest global recipient of Chinese investments (4.8 percent of the total), only behind the U.S. (14.3 percent), Australia (7.8 percent), and the United Kingdom (7.4 percent). These investments by China have resulted in a fundamental contribution of resources to the Brazilian economy but have not come without its set of challenges. From 2007 to 2021, 76.4 percent of the Chinese investments were concentrated in the energy sector (electricity, and oil and gas extraction), while only 5.5 percent went to the manufacturing industry and 4.5 percent went to infrastructure works, among other greatest needs of Brazil’s economy.

The Brazilian electricity sector was the largest destination for Chinese investments (45.5 percent of the total), but part of this corresponded to the purchase of Brazilian state-owned companies by Chinese state-owned companies. In 2017, the Chinese company State Grid acquired a controlling interest in CPFL Energia, a state-owned company in the state of São Paulo, and in 2021, CPFL Energia bought control of CEEE-Transmissão, a state-owned company in the state of Rio Grande do Sul. For Brazil, these were not good deals and demonstrated the irresponsibility of neoliberal state governments of the Brazilian Social Democratic Party (PSDB), which privatized strategic public assets. China—which would never sell a state-owned energy company to foreigners—took care of its own interests and took advantage of a business opportunity offered by the market. It was not a privatization package imposed by the International Monetary Fund. But would Beijing be willing to accept other investment models that would bring more benefits to both countries?

The Example of the Southern Hermanos

Since 2021, Buenos Aires and Beijing have entered into a series of strategic investment agreements. In February 2022, Argentina joined the Belt and Road Initiative, which is expected to attract $23 billion in Chinese investments for Argentina. Before that, other investments and projects by Chinese companies included the reform of the Argentine railway system ($4.69 billion), and, voluminous investments in the electric sector, such as 1) the expansion of the Cauchari Park, Latin America’s largest solar power plant, which was originally a Sino-Argentinian partnership, 2) the construction of the “Kirchner-Cepernic” hydroelectric complex in Patagonia (costing more than $4 billion), and 3) the construction of the “Atucha III” nuclear plant (costing $8.3 billion), whose financing has an approximately eight-year grace period and, most importantly, it provides for the transfer of Chinese Hualong nuclear technology—mastered in 2021—to the Argentine state, which will control the plant.

Brazil can propose partnerships similar to those by Argentina that are just as or even more strategic, with mutual benefits. Why not propose to exchange commodities (oil and gas) for infrastructure and technology with China, as countries like Iran have already proposed? Or the formation of more Sino-Brazilian joint ventures—which received only 6 percent of Chinese investments (2005-2020), while mergers and acquisitions received 70 percent—that provide for technology transfer to Brazil?

Brazil will need a gigantic effort to reindustrialize its economy at several levels, such as investment in research and development, training of skilled labor, financing, and technology transfer. No other country, such as China, has the financial, industrial, and technological conditions to cooperate with Brazil in numerous promising sectors, like electric vehicles, information technology, 5G, renewable energy, aerospace, biomedicine, and semiconductors. It is up to Brazil to propose a high-level strategic dialogue with China, which reaffirmed in the report of the 20th National Congress of the Communist Party of China that it is committed to helping to accelerate the development of Global South countries. “China is prepared to invest more resources in global development cooperation. It is committed to narrowing the North-South gap and supporting and assisting other developing countries in accelerating development,” President of China Xi Jinping said during the congress.

As the World Fixates on Ukraine, Another War is Brewing in the Middle East

Patrick Cockburn

Photograph Source: Darafsh – CC BY-SA 4.0

As war rages in Ukraine, another conflict is ready to explode in the Middle East as the US and its allies confront Iran over its nuclear programme, supply of drones to Russia, and repression of anti-government protests.

If the US or Israel were to attack the main Iranian nuclear facility producing weapons-grade nuclear fuel, Iran would most likely retaliate by using its drone and missile arsenal to close the Strait of Hormuz at the mouth of the Gulf, through which tankers daily carry almost a fifth of the world’s oil and gas.

The confrontation escalated sharply this week when Iran announced that it intended to make near bomb-grade nuclear fuel at its Fordow plant, located inside a mountain to protect it from bomb and missile attack. Iran decided to ramp up its nuclear programme after the failure of talks to revive the Joint Comprehensive Plan of Action (JCPOA) nuclear deal agreed in 2015 by President Barack Obama but denounced and dropped three years later by President Donald Trump.

Escalating crisis

At the heart of the agreement was a far-reaching reduction in economic sanctions on Iran in return for international monitoring of a reduced Iranian nuclear programme, which Israeli and Western leaders say is aimed at producing a nuclear bomb.

The escalating crisis is a resumption of the confrontation three years ago between the US and Israel, on the one side, and Iran, on the other, that almost led to war. Under pressure from sanctions and threatened by military assault, Iran launched a highly successful drone and missile attack on Saudi oil facilities that briefly cut its oil output by half.

Iran was held responsible for explosions damaging oil tankers anchored at the mouth of the Gulf, and for guerrilla actions against US troops in Iraq. Trump retaliated by ordering the assassination of General Qasem Soleimani, in charge of covert Iranian operations abroad, who was killed in a drone strike in Iraq in early 2020.

Resurrecting the nuclear deal

The US-Iran military conflict came close to an all-out war, but de-escalated sharply with the replacement of the aggressively anti-Iranian Trump by President Joe Biden who reopened negotiations for resurrecting the nuclear deal. Attention was diverted away from Iran by the Covid-19 pandemic, the US competition with China, and the war in Ukraine. As recently as September, Iran appeared close to a new agreement on the JCPOA but asked for guarantees that the US would not unilaterally withdraw again.

Yet the failure to agree a nuclear deal is only one of a series of separate and unrelated events that have heated up the Iran crisis over the last two months, making it more explosive than ever. Israel’s Prime Minister, Benjamin Netanyahu, had been in the forefront under Trump, pressing for an attack on Iranian nuclear plant. After decisively winning a general election on 1 November, he is returning to power in Jerusalem at the head of the most hawkish and right-wing government in Israel’s history.

Always an opponent of the JCPOA, he is likely to put pressure on the US for military action against Iran. Israel and the US have both reportedly trained for an air strike against Iran and Netanyahu came close to ordering one.

A drone super-power

Two other coincidental developments are further poisoning relations between Tehran and Washington. Faced with the air superiority of the US and its allies in the Gulf, Iran turned itself into what has been described as “a drone super-power”, but the world only took on board the effectiveness of these cheap precision-guided missiles when Iran exported them to Russia for use against Ukraine.

Since October, they have partly destroyed Ukraine’s electrical system, depriving much of the country of heat and light. The surprise emergence of Iran as a significant player in the Ukraine war soured even further, if that were possible, its already toxic relations with the West.

A final ingredient super-charging the growing crisis is the protest movement in Iran, which shows no signs of dying away, despite extreme repression leading to the killing of 305 protesters including 41 children according to Amnesty International. The protests are more broadly based than in the past and the collective punishment of protesters serves only to produce more martyrs. The refusal of the Iranian football team to sing their national anthem in Qatar shows the extent and determination of the opposition.

Tanker traffic from the Gulf

But it is still too early to know if it is destabilising the regime and how far the government could successfully appeal to national solidarity in the event of a crisis with the US, and seek to demonise demonstrators as the proxies of foreign powers.

Vocal and irrepressible popular dissent will weaken the Iranian regime, but in other respects it is stronger than it was during the last near war. The price of oil and gas is high and the stoppage of supplies from the Gulf oil states on top of the loss of those from Russia would have a crippling effect on the world economy. Iran is better than before in stopping tanker traffic from the Gulf by the use of drones and missiles in large quantities against which there is no totally effective anti-aircraft defence.

Western and Israeli leaders have long argued that Iranian possession of a nuclear weapon would alter the balance of power in the Middle East. This is true enough, although US intelligence reportedly believes the Iranian leadership has not yet decided if it wants to build a nuclear weapon. So far, the mere threat of doing so has served it as a useful bargaining chip in negotiating with the US and its allies, whom Iran sees as irremediably hostile.

Air superiority

Paradoxically, the balance of power in the Middle East and the rest of the world has changed, but not because of the acquisition of nuclear weapons. As shown by attacks in the Gulf in 2019, and in Ukraine since October, middle ranking states like Iran and Turkey, and even very poor ones like Yemen, now enjoy a much more level military playing field with powerful states like the US, Britain or Israel. Air superiority no longer means control of the skies, which is a game-changing development.

But how far are those who decide on war or peace in the Middle East aware that the game really has changed? Gulf states like Saudi Arabia and UAE realised after the last US-Iran clashes under Trump that they were all too likely to be collateral damage in any American or Israeli attack on Iran. Biden already has his hands full with the war in Ukraine. Israel should know that Iran would find some asymmetric way of striking back at it.

As with Ukraine, the self-interest of all sides should prevent the crisis over Iran turning into a shooting war – but that does not mean it will not happen.

Germany: More than one-third of all students at acute risk of poverty

Ela Maartens

The already dramatic social plight of German students is growing worse. According to the latest figures from the German Federal Statistics Bureau, more than a third of all students were at risk of poverty in 2021. For students living alone or in a shared apartment, the percentage of students facing poverty reached a shockingly high 76.1 percent. Policymakers are leaving students in the cold.

Since the start of the coronavirus pandemic, many students have been laden not only with massive health risks, but also to financial burdens. According to a report by the charity organization Paritätischer Wohlfahrtsverband from May of this year, one in three German students lived below the poverty line in 2020. Inflation and skyrocketing energy prices—both consequences of NATO’s proxy war against Russia in Ukraine—are drastically exacerbating the situation.

All told, 37.9 percent of all students were at risk of poverty last year, according to the Federal Statistics Bureau. More than three-quarters of students who lived alone or with other students were considered vulnerable. The extent of student poverty becomes clear when compared with the population as a whole: The overall poverty rate in Germany is 15.8 percent.

But even these already dramatic figures do not reflect the full reality and are based on padded values presented by well-heeled EU bureaucrats. According to the European Union Statistics on Income and Living Conditions (EU-SILC), an unmarried individual is not considered at risk of poverty until he or she has less than €1,000 per month before taxes at his or her disposal.

The figures hardly begin to illustrate the dramatic impact that the massive increase in energy prices will have on students in the coming months. Two in five students (38.5 percent) were unable to finance a major unexpected expense in 2021. The same was true for 55.5 percent of students who do not live with relatives. Back payments for incidental expenses amounting to several thousand euro, which countless people face, will drag students into the financial abyss, even if they are spared other difficulties.

Student City in Munich [Photo: WSWS]

The disastrous housing situation that students face in almost every university city is likewise not reflected in the figures of the Federal Statistical Office. Rents are mostly unaffordable and rooms in student dormitories are few and far between. Overall, almost a quarter of all students are considered overburdened by monthly rents consuming over 30 percent of their meager income. Those who live alone or in a shared apartment are hit even harder, spending 56.6 percent, more than half of their monthly income, on rent.

The financial burden of the ever-escalating confrontation with Russia is not just being passed on by the federal government to workers and pensioners. It is also hitting students with full force. Last week, the government coalition committed a one-time energy supplement for students amounting to a pitiful €200. This sum was announced in September with a so-call relief package, for which a vote in the Bundestag (federal parliament) is still pending.

It is completely open as to when students will be able to apply for this “mercy money,” let alone receive it. Even the question of how the energy supplement can be requested is unresolved. If, contrary to expectations, a swift decision is made, this will not prevent countless students from falling into debt. In October, the Federal Statistical Office calculated a staggering 43 percent price increase for energy products compared to the same month last year. And there is no end in sight.

In response to the increasing social hardship suffered by students, especially since the start of the coronavirus pandemic, the maximum federal student loan (BaföG) was increased last July. But these adjustments are nothing more than a drop in the bucket: instead of €427, students receive a maximum of €452 per month. The rent subsidy was raised by a meager €35 to €360. Meanwhile, inflation is devouring these subsidies while students are still struggling through the complicated application process.

Furthermore, completely inadequate BAföG adjustments were concluded with regard to the allowances for parental income: the age limit was increased and the maximum family income for eligibility was raised.

Meanwhile, the disbursement of the €230 heating cost subsidy for BAföG recipients is barely moving forward. So far, only 40 percent of those entitled have received the payment, although it was announced in the summer to be automatically implemented. Meanwhile, a further subsidy of €345 concluded.

It is significant that, according to the report by the Paritätischer Wohlfahrtsverband, the number of BAföG recipients has continually decreased since 2012, while the number of students at risk of poverty has risen sharply, especially in the last two years. In 2010, 18.4 percent of students still received state support. Due to years in which no increase was made to adjust to the reality of life, the number dropped to 11.3 percent in 2020.

Students are being plunged ever deeper into social catastrophe by the ruling coalition of Social Democrats (SPD), the Greens and the liberal Free Democrats (FDP) with the support of all bourgeois parties and the unions.

According to the Paritätischer Wohlfahrtsverband, inflation and further increases in energy prices will have a massive impact on the educational opportunities for young people. Very few parents can afford to support their children financially during their studies, the study concluded. Andreas Aust, social policy officer at Paritätischer, told Deutsche Welle: “Those who are short of money will think twice and three times before sending their children to study under these conditions.”

While ever greater numbers of students, pensioners, workers and their families are suffering the consequences of the coronavirus pandemic and the war in Ukraine, the government decided in February to create a special fund for the German armed forces amounting to €100 billion. This week will see the second reading of the 2023 federal budget, which will also be dominated by the cost of military rearmament.

The population will have to bear the costs in two ways. On the one hand, every euro that flows into the military will be balanced by cuts in education, social services and health care. On the other hand, the ruling class continues to escalate the NATO proxy war in Ukraine against nuclear power Russia, which puts the existence of the entire human race at risk.

Germany’s coalition government adopts a budget for war and austerity

Johannes Stern

The 2023 budget passed in the German parliament on Friday is a declaration of war on working people. At its centre is a massive increase in military spending and extreme cuts in the areas of health, education, and social welfare.

In June, at the behest of the “traffic light” coalition of the Social Democrats (SPD), Liberal Democrats (FDP) and Greens, the Bundestag (federal parliament) passed funding for the “Special Assets of the Bundeswehr [Armed Services],” amounting to more than €100 billion, launching the largest rearmament offensive since the end of the Second World War. Now, the far-reaching consequences of renewed German militarism—initiated with the foreign policy shift in 2013/14 when the leading state representatives announced Germany’s return to an aggressive foreign and great power policy—are reflected in the budget.

The only expenditure that is increasing massively is military spending. A total of €58.6bn is budgeted for 2023—an increase of €8.2bn compared to last year; €8.5bn will come from the special fund, which is not officially part of the defence ministry budget. The additional money will be used, among other things, to purchase F35 combat aircraft, CH-47 heavy transport helicopters, Puma infantry fighting vehicles, four F126 frigates and personal protective equipment for soldiers.

In the coming years, the defence budget is then expected to increase even more. Defence Minister Christine Lambrecht (SPD) told the Bundestag that she was “very grateful” to have heard “from various sides here today that this budget will have to grow in the future.” She added cynically that the current increases were just enough to “make ends meet.”

Karsten Klein, who sits on the “Bundeswehr Special Assets” parliamentary committee for the FDP, clarified the sums involved. “€300 billion are being provided by this German Bundestag, by taxpayers, by the federal government to the defence ministry for arming and equipping our Bundeswehr, for the soldiers. €300 billion in this legislative period!”

In terms of annual budgets, this means that in 2024, 2025 and 2026 a yearly average of €80.5bn will flow into the military. And even that is only the beginning. The ruling class is pursuing the declared goal of making Germany once again the “leading military power” (Lambrecht) and the Bundeswehr “the best-equipped armed force in Europe” (Chancellor Olaf Scholz).

Chancellor Olaf Scholz (SPD) speaking in the Bundestag debate on 23 November 2022 [AP Photo/Markus Schreiber]

In his speech in the debate on Wednesday, Scholz gave an insight into the insane rearmament plans. He said the “special assets” funding would enable Germany “to organise an orderly, a sensible change of path. We will and want to spend 2 percent of economic output on the Bundeswehr,” he declared.

The ruling class is working to switch the economy towards armaments in order to implement the war course that has been decided—which is currently directed mainly against Russia. We must ensure “that the factories and the machines are acquired for the things that are newly created,” Scholz stated. It was a matter of “equipping the Bundeswehr in such a way that it will function for decades. That’s what the special fund is about: a long-term plan.”

This “long-term” rearmament goes hand in hand with historic attacks on the living standards of the working class. While energy prices are skyrocketing because of the NATO offensive against Russia, and the highest inflation rate in decades is already pushing millions into poverty, the costs of war are being passed on entirely to working people. Adjusted for inflation, these are the biggest cuts since the end of the Second World War.

In nominal terms, the total budget is down from €495.79bn last year to €476.29bn, a further drop of almost €20bn. In 2021, it had still amounted to €556.6bn. Next year’s planned new debt is only €45.61bn compared to €138.9bn in 2022.

Finance Minister Christian Lindner (FDP) boasted in the Bundestag that he had complied with the debt ceiling and held out the prospect of even more severe cuts in the future. With the current austerity budget, “budgetary normality has not yet been reached,” and it was “the claim of this coalition to return as quickly as possible to the principle that only what has previously been earned can be spent.” For 2024, with net borrowing of only €12.3bn, the budget is to fall by a further almost €53bn, to €423.7bn euros.

The biggest savings are in health. This year, the budget will be cut by almost €40bn (!) from €64.36 to €24.48bn—and that amid an ongoing pandemic, which has already cost more than 157,000 lives in Germany alone. Currently, more than 1,000 people are succumbing to the virus every week, even before the impending winter wave. The ruling class is reacting to this by ending the last remaining protective measures and almost completely cancelling the funds for fighting the pandemic.

Thus, the item for prevention and for health associations drops from €9.57bn to €2.59bn. The grants for the fight against COVID-19 included in this amount will only be €119.4 million (2022: €1.9bn). The vaccination campaign is also essentially discontinued. The “grants for the central procurement of vaccines against SARS-CoV-2” included in the budget will drop from €7.09bn last year to €3.02bn.

There are also severe cuts in all other areas of the already broken health system. For example, expenditure on “nursing care and other social security measures” will drop by more than €2bn from €3.28bn to €1.08bn.

The ailing education sector is also being cut. The education budget will officially increase by a measly €500 million to €21.46bn (2022: €20.89bn)—but adjusted for inflation, this means a massive reduction. At the same time, the education sector is increasingly being put at the service of war policy. For example, the budget includes €2.1 million for the establishment of a “Conflict Academy” at the Institute for Interdisciplinary Research on Conflict and Violence at Bielefeld University. In the coming budget years, millions more are to flow into this and similar projects.

The so-called “social reforms” that the coalition boasts about cannot hide the class character of the budget but underline it. The “citizen’s income,” also passed on Friday—with the votes of the Christian Democrats (CDU/CSU)—is nothing more than the hated “Hartz-IV” welfare payment system under a new name. The bulk of the so-called “aid money,” like Scholz’s €200bn defence umbrella, flows into the pockets of the big corporations and the super-rich, just like the coronavirus aid packages in 2020/21.

The whole “debate” in the Bundestag underscored that working people are confronted with a conspiracy of all the establishment parties. If there was criticism of the budget, it came essentially from the right. Representatives of the CDU/CSU and the far-right Alternative for Germany (AfD) complained that rearmament was not being pushed even faster.

Speakers for the Left Party also made clear that despite their hypocritical criticism of the defence budget, they stand behind militarisation. For example, Gesine Lötzsch, the Left Party’s representative on the “Bundeswehr Special Fund” committee, described “a well-equipped army for national defence” as “our constitutionally guaranteed view.” At the beginning of the week, Bodo Ramelow, the “left-wing” state prime minister of Thuringia and current chair of the Bundesrat (Upper Chamber of the federal parliament), had even spoken out in favour of arms deliveries to Ukraine and the reintroduction of compulsory military service.

The Left Party also criticised the domestic affairs budget from the right. This is even though it includes €1.8bn more than originally planned. Half of the expenditure is earmarked for the security authorities. The Federal Interior Ministry alone and its subordinate authorities, including the domestic Secret Service, will receive 1,607 additional posts.

This is obviously not enough for the Left Party. In her speech, Martina Renner, the party’s representative in the Domestic Affairs Committee, complained that “to date, the posts from the increase in the last budget have not been nearly filled.” There were “9,000 vacancies in the federal police alone.”

Hardly anything could better illustrate the right-wing bourgeois character of the Left Party than the call for more military and police. As the party of the state apparatus and upper middle class layers, the Left Party fears the growing opposition of workers and youth to capitalist war and austerity policies like the devil fears holy water. In the 2014 European elections, it had put up posters saying “Revolution—No thanks!” to signal to the ruling elites that it stands on their side when it comes to suppressing an independent working class movement.

Malaysian election presages deeper political crisis

Peter Symonds

Malaysia’s general election held on November 19 and the subsequent swearing-in of Anwar Ibrahim as the new prime minister last Thursday mark a further fracturing of the country’s political establishment and presage new political upheavals.

None of the three major electoral coalitions—Anwar’s Pakatan Harapan (PH), Perikatan Nasional (PN) and Barisan Nasional (BN)—obtained a parliamentary majority, leading to days of crass political horse-trading and closed-door discussions in ruling circles.

Malaysian opposition leader Anwar Ibrahim shows his ballot during the election at a polling station in Seberang Perai, Penang state, Malaysia, Saturday, Nov. 19, 2022. [AP Photo/Vincent Thian]

Anwar was finally installed by royal decree based on coalition agreements with BN and Gabungan Parti Sarawak—a party based in Borneo.

The extent of the political crisis is underscored by the fate of the right-wing United Malays National Organisation (UMNO), which, as the dominant party in BN alliance, had governed from 1957 to 2018 through a combination of electoral gerrymander, police state measures, control over the media and state apparatus, and the promotion of ethnic Malay chauvinism.

UMNO’s loss of power in the 2018 general election marked a political watershed and ushered in four years of turmoil. Anwar’s PH won the election in a cynical electoral pact with former prime minister Mahathir Mohammad who broke from UMNO accusing it of corruption, failing to sufficiently support ethnic Malays, and pandering to China.

The alliance was inherently unstable. Amid the 1998-99 Asian financial crisis, Mahathir as prime minister had broken with Anwar, then deputy prime minister and financial minister, over economic policy—Anwar pressed for the adoption of the IMF’s severe pro-market restructuring, which Mahathir rejected as it would devastate UMNO’s ethnic Malay business cronies. Mahathir expelled Anwar and his supporters, then had him arrested, beaten up and jailed on trumped up charges after Anwar initiated anti-government rallies.

Under the 2018 electoral pact, Mahathir was made prime minister even though his Bersatu party held a relatively small number of seats; he was meant to hand over the leadership to Anwar within two years—an agreement that was never going to be kept. Political intrigues came to a head in 2020 when the pact between PH and Bersatu fell apart—with Bersatu and several PH factions, including the Islamist Parti Islam se-Malaysia (PAS), joining with UMNO and its allies to form another unstable government with Bersatu’s Muhyiddin Yassin as prime minister.

The Bersatu-led regime imploded in 2021 amid soaring COVID-19 cases and a deep crisis of the health system, replaced by an equally unstable UMNO-led coalition with its leader Ismail Sabri Yaakob as prime minister. His calculation that UMNO would gain from an early snap election backfired badly—the party that ruled Malaysia for six decades with its BN allies was reduced to a rump of just 30 seats in the 222-seat parliament.

Nor did Anwar’s PH alliance make gains—in fact, it won just 82 seats, down from 100 in the 2018 election. Anwar sought to portray PH as a progressive alternative to UMNO and BN, opposing its anti-ethnic Chinese and anti-ethnic Indian discrimination, its police state measures and promoting a new inclusive, multi-cultural Malaysia to attract youth, in particular. This general election was the first in which 18-20 year-olds had a vote.

Nevertheless, Anwar willingness to ally with Malay-chauvinist parties—first the Islamist PAS, then Mahathir and now an open coalition with the widely despised UMNO—has severely tarnished this image. Indeed, its other coalition partner—Gabungan Parti Sarawak—was formed from UMNO allies in Sarawak after the 2018 defeat.

Anwar has been installed with the backing of significant sections of the ruling class amid the country’s mounting economic and social crisis. Malaysia’s economy is expected to grow by just 4 to 5 percent next year, compared with more than 7 percent in 2022. Moreover, it is just recovering from the economic impact of the COVID-19 pandemic, which in 2020 led to a huge 10 percent fall in economic growth to register negative 5.6 percent for the year.

As is the case around the world, inflation is hitting the working class hard with real wages falling. Despite government price subsidies, the cost of living increased by 4 percent in October. Food inflation, which hits the poorest layers of working people hardest, is significantly higher, reaching 7.1 percent in October. In 2022, according to one survey, salaries increased by just over 5 percent.

Official figures disguise the extent of the social crisis. Barjoyai Bardai, professor emeritus at Universiti Tun Abdul Razak, estimates that real inflation in Malaysia is 11 percent. Meanwhile, a survey by the consultancy ECA International expects salaries to rise by just 2.2 percent next year.

While reports of strikes and protests are limited, there are signs of growing social unrest. In July, hundreds of students protested demanding price controls and subsidies for food. Some reported skipping meals, with one telling Channel News Asia: “Our food security is threatened… I feel a bit frustrated to see how the government isn’t taking any action.”

In early August, thousands of food delivery riders held a 24-hour nation-wide strike to demand higher levels of compensation. In late August, the conservative Malaysian Trades Union Congress (MTUC) threatened to take action over the low wages and conditions of cleaners and security guards in schools and public buildings, reflecting far deeper underlying discontent.

In a bid to appeal to ethnic Malays, as well as to exploit widespread discontent over declining living conditions, Anwar told an election rally: “People say ‘Long live the Malays’ but majority Malays are poor and face hardship. Only those at the top enjoy a good life. I want to be a prime minister for everyone.”

In reality, the new government has no solution to the social crisis. Indeed, Anwar’s commitment to pro-market restructuring will impose new economic burdens on working people. Significantly, when Anwar’s selection as prime minister was announced, the Malaysian currency rallied by 1.8 percent and domestic share prices surged by 4 percent.

Geoffrey Williams, an economist at the Malaysia University of Science and Technology, told Al Jazeera he expects Anwar will run a pro-market administration, with cuts to welfare programs: “There will be fewer handout-based policies and more structured long-term solutions. I also think he will offer a very attractive prospective for international investors and financial markets.”

Insofar as Anwar’s PH addressed the issue of food inflation, its policies are pitched to big business, promising tax incentives for companies producing basic foods, and special grants and loans to increase the use of technology in the agricultural sector.

The COVID-19 pandemic, which led to the collapse of the Bersatu-led government last year, is again surging. According to the director-general of health, during the election campaign, there was an increase of more than 57 percent in new weekly cases from 16,917 in the last week of October to 26,616 in the first week of November. Several parliamentary candidates tested positive.

None of the parties supports a policy of elimination. On October 31, caretaker health minister Khairy Jamaluddin said mask wearing in crowded areas was “highly encouraged” but “still voluntary” despite a 14 per cent increase in the number of people being admitted to hospital in the space of one week.

The election manifestos of PH, as well as of its new ally BN, promised to increase public healthcare spending from the current 2.6 percent of GDP to 5 percent within five years. Neither explained how the doubling of public health spending would be funded.

The latest government headed by Anwar, which is riven with deep political differences, will be no more stable than any of the others over the past four years. Incapable of addressing the social needs of working people, it will undoubtedly begin to fracture—sooner, rather than later.

Waiting in the wings is the third electoral coalition, dominated by Bersatu and the right-wing Islamist PAS, that won 73 seats. PAS was the only party to make significant electoral gains, pushing its reactionary mix of Malay chauvinism and calls for sharia law. It has extended its influence from its largely rural strongholds in the east of the Malaysian peninsula to so-called liberal bastions in the west such as Penang, winning 49 seats compared to just 17 prior to the election.