Olaf Scholz has a year left before a September 2025 election at which he insists he will seek a second term. EPA
Olaf Scholz has a year left before a September 2025 election at which he insists he will seek a second term. EPA
Olaf Scholz has a year left before a September 2025 election at which he insists he will seek a second term. EPA
Olaf Scholz has a year left before a September 2025 election at which he insists he will seek a second term. EPA

Does German migration crisis spell the end for Olaf Scholz?


Tim Stickings
  • English
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At a meet-and-greet this week with the foreign diplomatic corps in Berlin, German Chancellor Olaf Scholz admitted his guests might be finding it hard to explain in their cables home “where Germany is going politically”.

What should foreigners make of the rise of Germany’s far right? What about its stagnant economy and its changing security policy? These were reasonable questions, Mr Scholz said, and nobody knows for sure “where we will be in 10, 20 or 30 years”.

The problem for Mr Scholz is that nobody knows exactly where he will be in even one year’s time. With a September 2025 election coming gradually into view, support for the Chancellor is at rock bottom after three crisis-hit years and a spate of terrorist incidents in recent weeks.

Polls paint a bleak picture. Only 23 per cent of Germans think Mr Scholz should even run for a second term. A resounding 84 per cent are unhappy with his government and the parties in his left-green-liberal “traffic light coalition” would win only 30 per cent of the vote between them according to one recent survey, down from 52 per cent at the last election.

Perhaps the only good news for Mr Scholz is that the opposition leader Friedrich Merz is not especially popular either, and faces a power struggle with the swaggering Bavarian premier Markus Soeder to fly the conservative flag in 2025. But the far-right Alternative for Germany (AfD) has preyed on this sense of disaffection with all mainstream parties.

"It is really a tough time for the German government under any circumstances, but it's also coming towards a government that has not found its stride in simply governing," said Hans-Jakob Schindler, a former German diplomat and director of the Counter Extremism Project. He said no mainstream party had "found a recipe" to counter the AfD's narrative.

An air of constant infighting in Mr Scholz's coalition "gives the impression that it's a really dysfunctional government", even if in fact it can point to certain successes such as ending Germany's reliance on Russian gas imports, Mr Schindler told The National.

The Alternative for Germany has made historic electoral gains despite reminding many Germans of their darkest chapter. EPA
The Alternative for Germany has made historic electoral gains despite reminding many Germans of their darkest chapter. EPA

Migration tailspin

An explosion of voter anger over migration has sent German politics into a tailspin. Refugee centres have been filling up for months with more than 174,000 asylum claims lodged this year, almost a third of them from Syrians. On August 23, three people were killed in a knife attack in Solingen and a Syrian with no right to stay in Germany was arrested.

Seizing on the violence, the AfD won a state election in Thuringia on September 1, the most significant victory for a far-right party since 1945. The party is under intelligence surveillance after a court ruled it sees Muslims and refugees as second-class citizens, and that rhetoric about "invaders" and "knifemen" is not the result of isolated "gaffes".

There is an air of crisis as Mr Scholz holds cross-party talks with the opposition and entry checks are ordered around Germany's entire land border. The AfD is delighted at what it calls a "new conservative zeitgeist". Bernd Baumann, an AfD MP, looked theatrically to the sky as he declared in parliament that history had shown "we were right".

As a candidate in 2021 Mr Scholz was praised for a calm and reassuring manner. In office that has often been perceived as weakness and inertia, a complaint that surfaced during Russia's invasion of Ukraine and has become a prime grievance with his leadership style.

He also has limited room for manoeuvre within his coalition, where his Green coalition partners are wary of an "overheated discussion" about migration. There was dismay when a Green party leader spoke of a "caretaker government" but a lame-duck image is gaining ground. Mr Soeder says the Scholz era is "not going to work out".

Entry checks have been ordered around Germany's entire land border in a crackdown on illegal migration. Getty Images
Entry checks have been ordered around Germany's entire land border in a crackdown on illegal migration. Getty Images

Deportation options

Interior Minister Nancy Faeser insists it is not "business as usual". In a flurry of activity the government has closed borders, organised a first deportation to Taliban-ruled Afghanistan and drafted two new laws on asylum and extremism. Among other things, refugees who take holidays in their home country will lose their protection status in Germany.

The opposition Christian Democrats (CDU), the party of former chancellor Angela Merkel, now say she made a mistake by opening Germany’s borders to Syrian refugees in 2015. They believe the crackdown by Mr Scholz's government does not go far enough.

At the heart of the debate is whether police can summarily turn away refugees at the border. Ms Faeser's boast that 30,000 people have been denied entry in the past year covers people with visa bans or who were otherwise ineligible, but not asylum seekers.

Mr Merz wants to declare an emergency under EU law to make this possible, rather than relying on asylum seekers being returned later under EU rules. The government is exploring its legal options but would prefer to make the EU regulations work by withholding social security benefits and waiting for a wider asylum reform to take effect.

Ministers have fused together migration and extremism issues in a "security package" that includes a widening of surveillance powers. Since the Solingen attack there have been further scares involving an Austrian gunman near Israel's consulate in Munich and a Syrian with alleged plans to kill soldiers with machetes.

Mazen Darwish, a Syrian lawyer who helped prosecute a member of President Bashar Al Assad's regime in Germany, said Syrian civil society wanted to be "partners in finding extremism". "We are against any criminal, whatever his nationality, religious or ethnic [background], and this is yesterday, and today and tomorrow," he said.

A gunman opened fire at the Israeli consulate in Munich last week in what police called an attempted terrorist attack. EPA
A gunman opened fire at the Israeli consulate in Munich last week in what police called an attempted terrorist attack. EPA

Election war games

Mr Scholz insists he will seek a second term in 2025, recalling his late surge to victory three years ago after months stuck in third in the polls. His plain-speaking Defence Minister Boris Pistorius has been touted as an alternative but has shown no inclination to stage a party coup.

On the right Mr Merz is the most obvious flag-bearer for the Christian Democrats, but their Bavarian sister party provides a challenger in the form of Mr Soeder. Having lost the nomination to the luckless Armin Laschet four years ago, Mr Soeder is signalling he wants his turn in 2025.

Talk of possible coalitions is already in the air but it is taboo for any mainstream party to work with the AfD, despite its plans to run a "chancellor candidate" for the first time in 2025. Here, too, there may be a power struggle between joint party leaders Tino Chrupalla and Alice Weidel.

Nonetheless, the AfD's Mr Baumann believes there is a "shifting of the power axis" as politicians bid to outdo each other in their toughness on migration. Mainstream parties have failed to understand how far-right narratives gain traction online and on social media, said Mr Schindler.

Every AfD MP has a TikTok account, whereas most of their centrist rivals do not promote their policies there, he said.

"What is true for terrorism is true for all political issues right now – the online sphere plays a very significant role," he said. "It's a real indicator of how inept the traditional parties are at countering this populist phenomenon and communicating as effectively as populists."

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Ten tax points to be aware of in 2026

1. Domestic VAT refund amendments: request your refund within five years

If a business does not apply for the refund on time, they lose their credit.

2. E-invoicing in the UAE

Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption. 

3. More tax audits

Tax authorities are increasingly using data already available across multiple filings to identify audit risks. 

4. More beneficial VAT and excise tax penalty regime

Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.

5. Greater emphasis on statutory audit

There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.

6. Further transfer pricing enforcement

Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes. 

7. Limited time periods for audits

Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion. 

8. Pillar 2 implementation 

Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.

9. Reduced compliance obligations for imported goods and services

Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations. 

10. Substance and CbC reporting focus

Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity. 

Contributed by Thomas Vanhee and Hend Rashwan, Aurifer

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Updated: September 15, 2024, 8:30 AM