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21 November 2021

Germany's federal virus

The massive outbreak in Covid-19 hospitalisations and fatalities in Germany raises disturbing questions about who is in charge. Having failed to achieve the right levels of vaccine procurement early on during the pandemic, the German authorities have repeated the same mistake. They did not procure the booster shots they needed. They have not set up a network of vaccination centres to deliver them rapidly.

As of this weekend, only 11.4% of the population has received booster shots. It is very difficult to get an appointment. Only doctor's surgeries are allowed to deliver them. The network has not been expanded to pharmacies. Since the effectiveness of the Covid vaccines drops after around 6 months, Germany is entering the winter with a large part of the population not having current protection, through a combination of choice and systems failure. Lothar Wiele, president of the Robert-Koch Institute, warned this week that Germany is running out of intensive care beds. This is a first-order emergency, he said.

So why is this happening again? The answer is that the German healthcare system, well-funded as it is, is not set up for a pandemic, or indeed for public health emergencies in general. This is a publicly-funded, but privately run, healthcare system. The states are in charge of the local healthcare administrations and hospitals. Health insurance is a matter for the federal government, but states supervise the health insurance companies. What can possibly go wrong?

The federal government's main responsibility in the fight against Covid-19 is to coordinate the pandemic response. The federal states have co-decision rights through their representatives in the Bundesrat, the upper chamber of parliament. Germany has a similarly devolved system for flood disasters. There is no hope whatsoever that the country has drawn any lessons from the summer floods that killed 184 people in western Germany. Healthcare and flood management are essentially about the preservation of local fiefdoms.

Don't expect the traffic light coalition under Olaf Scholz to change that. It has no majority in the Bundesrat, where the CDU remains the dominant party. Ineffective crisis mismanagement is guaranteed to persist. Germany's federal system is one of interwoven rights and responsibilities, shared taxes and shared investment programmes between the federal governments and the Länder. In addition, there are also financial flows from richer states to the poorer ones. Mathematical knot theory cannot even begin to unravel the mess. The setup is very different from the US or the Swiss federal systems, where rights and responsibilities at each level are more clearly assigned.

The German system was created to prevent abuses of power, an area in which it excels. But it is not built to adapt quickly. A single election changes nothing. This turned out to be an ideal environment for the manufacturing industry during good times. But these are not the times we are living in. We struggle with climate change, diseases, and technological disruption on an unprecedented scale. And our main trading partners are countries run by dictators.

Germany's experience constitutes a cautionary tale for the EU, where the separation of powers is also not as clear as it used to be. Lack of clear division of responsibility is the reason why people unfairly blame the EU for a lack of vaccine supplies, or crises on our borders. Competition and trade policies work much better because there is a clear line between EU and member state competencies. The EU fulfils some useful coordinating functions in foreign policy too, but we have to remind ourselves that the EU is not a foreign policy actor that acts independently of the member states. Just as the German government is not a healthcare actor. Europe's geopolitical failure is not a failure of any single institution, but a consequence of the fact that nobody is in charge.

My advice to europhiles everywhere, and especially in Brussels, is not to seek an expansion of your powers into new areas, but to deepen your powers in existing ones. You should focus on completing the euro area through a capital markets union, banking union and joint fiscal regime. The last thing you need is a special reaction force.

My advice to my friends in Berlin is to strive towards a clearer separation of state and federal powers in the management of epidemics, floods, and other emergencies that do not stop at state borders. Right now, the federal government in Berlin is not equipped to fight a virus, just as the EU is not equipped to fight a dictator.

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