Charlotte Street Partners



Scholz in Wunderland

Written by Javier Maquieira, senior associate 
Edited by Adam Shaw, associate partner
26 November 2021

Good morning,

On Wednesday we got a glimpse of how life in Germany – and Europe – after 16 years of Angela Merkel’s leadership could look over the next four years.
After weeks of negotiations, the German Social Democrat chancellor-in-waiting, Olaf Scholz, presented the agreement reached between the parties forming the so-called “traffic light” coalition: the Social Democrats (SPD), the Free Democratic Party (FDP), and the Greens.
The coalition’s plans for the next German government include big changes across the board with a combination of commitments, ranging from a more permissive drugs policy to easier access to citizenship, and a pledge to drive more public and private investment towards a decarbonised and digital economy.
In Scholz’s words, the new government aspires to work as a uniting force behind a “desire to hold the country together, improve it and to achieve progress”. Yet the 178-page deal, for all its ambition, isn’t free of compromises.
Under the agreement, which is yet to get formal approval from party members and parliament, the SPD would appoint the federal chancellor, Olaf Scholz, as well as the interior, labour, defence, and health ministries.
Meanwhile, the Greens would provide the vice-chancellor and the leadership for the foreign office, the economy and climate protection “super-ministry”, as well as the family, environmental conservation, and food and agriculture portfolios. The FDP would have the finance ministry – a post likely to go to party leader Christian Lindner – in addition to the justice, transport, and education briefs.
One of the most noticeable features of the coalition’s sales pitch is its ambitious climate targets, which include bringing forward the target for phasing out coal to 2030 and increasing the contribution of renewable energy to Germany’s electricity supply to 80% by the same year. Bearing in mind that renewables currently account for just 35% of electricity generation in the country and its last nuclear plant is due to be switched off in 2022, to say the task at hand is herculean would be an understatement.
Despite these ambitious commitments, the coalition government will still have to deal with the Bundesrat – Germany’s federal upper chamber – where 10 of the 16 represented state governments belong to the conservative Christian Democrats (CDU) and its Bavarian sister party (CSU), from which the new government will need buy-in on all its big projects.
Even within the coalition, an easy cohabitation in office isn’t a given, especially considering some of the bigger incompatibilities between the three parties’ electorates on issues such as fiscal rules or the tone of foreign policy. If the opposite bears scrutiny, however, the traffic light coalition has the potential to bring a much-needed breath of fresh air to both German and European policymaking.
For the time being, Scholz and company will first have to face an acute Covid-19 crisis in a country where the debate around coronavirus restrictions versus personal freedoms remains deeply divisive. Against this backdrop, the traffic light Wunderland painted by Scholz is off to a challenging start.


France has cancelled high-level talks with the UK after Boris Johnson rejected pleas to provide safe routes for refugees to reach Britain from continental Europe and called on the French government to “take back” people that cross the Channel to the UK. The prime minister had written to French president Emmanuel Macron setting out steps to avoid a situation like Wednesday’s tragedy, when 27 people died.
The UK has introduced new Covid-19 restrictions on travellers arriving from several southern African countries amid warnings over a new coronavirus variant. From 12:00 today, South Africa, Namibia, Lesotho, Botswana, Eswatini, and Zimbabwe will be added to the UK and Scottish governments’ red list, with flights from those countries being temporarily banned. The B.1.1.529 variant, of which no cases have been confirmed in the UK, has been described as “the worst one we’ve seen so far”.
At least 52 people have died after an explosion in a Siberian coal mine on Thursday. The blast was caused by a methane gas leak about 250m underground. An operation to reach dozens of missing miners turned to tragedy after several rescuers reportedly suffocated, forcing the search for survivors to be abandoned.

Business and economy

French fishermen are threatening to block the Channel tunnel and the port of Calais today in protest at the UK’s failure to grant them more fishing licences. The UK government has said it is “disappointed” and called on French authorities to ensure no laws are broken during demonstrations. London and Paris are in dispute over the number of licences the UK has allocated to French boats to allow them to fish in British waters since Brexit.
Amazon workers across 20 countries – including the US and UK – plan to participate in Black Friday strikes and protests today. The shopping-centric day is one of retail’s busiest days of the year, with products being slashed in price for maximum discounts. The Make Amazon Pay group is supported by a coalition of labour groups, trade unions, grassroots campaigns, and NGOs in individual countries.
Google Ireland has agreed a €218m (£183m) tax settlement with the Irish government this year, according to documents filed on Thursday. The US tech giant said it would pay corporation tax of €622m for 2020, including the €218m backdated settlement and interest charges. During 2021, Google paid interim dividends of €3bn to its parent company, Alphabet.

Columns of note

Writing in The Guardian, Gaby Hinsliff reacts to the biggest loss of life by drowning in the English Channel on record since human traffickers began using this route three years ago. She argues that Wednesday’s tragedy should shock the UK and French governments into working more closely together. In order to stop people drowning at sea, Hinsliff concludes, we need safe, legal routes out for asylum seekers; something only political maturity currently lacking, and a willingness to recognise tragedy as the spur to change, will achieve.
Chris Cummings writes in the Financial Times about this year’s Investment Association’s principles of executive remuneration, which build on continued restraint in light of the coronavirus pandemic and the best ways to incorporate ESG metrics into pay structures. On the latter principle, the author insists that shareholders need to know that where ESG factors are part of company’s strategy, these are reflected in leadership remuneration, and where they aren’t, the board should explain how they will do this in future years. Ultimately, by ensuring that executive pay is fair and linked to the future sustainability of the business and the planet, investment managers can help businesses thrive in future years. (£)


What happened yesterday?

London stocks closed in positive territory on a relatively quiet Thursday, with US markets closed for the Thanksgiving holiday. The FTSE 100 ended the session up 0.33% at 7,310.37, while sterling was weaker both against the dollar by 0.06% at $1.33 and versus the euro by 0.17% at €1.19.
In company news:
Vivo Energy was 18.67% higher after agreeing to be taken over by Vitol Investment in a deal worth around $2.3bn.
Mitchells & Butlers closed 3.56% higher after the pub chain returned to profit following the lifting of Covid-19 restrictions, despite warning that rising energy costs and wages would affect its results in the current year.
Hill & Smith was down 8.57%, despite the construction and infrastructure manufacturer saying it expects annual profit to meet market expectations after “robust” trading in the four months to the end of October.

What’s happening today?

Trading announcement
Reach Plc

Source: Financial Times

did you know

The philosopher Thomas Hobbes claimed that he was born prematurely because his mother was terrified by the imminent arrival of the Spanish Armada. (Source: @qikipedia)

Parliamentary highlights

House of Commons

No business scheduled.

House of Lords 

No business scheduled.

Scottish parliament 

No business scheduled.

Share this post