1974-1982 - Helmut Schmidt

Following Brandt's resignation in May 1974, the SPD-FDP coalition partners unanimously agreed that Minister of Finance Helmut Schmidt should head the new government. At fifty-five, Schmidt became the youngest chancellor of the FRG. Schmidt served over eight years in office, longer than any other SPD chancellor, and most were marked by crisis. Born in Hamburg in 1918, he served as an officer in World War II. After the war, he joined the SPD and served in Hamburg's municipal government, where he acquired a national reputation as a top-notch manager because of his competence in dealing with a severe flood in 1962. He was the SPD faction leader in the Bundestag and minister of defense in the first SPD-FDP cabinet. Schmidt gradually became recognized at home and abroad as a pragmatic politician and an expert in economic and defense matters. His first cabinet included the FDP's Hans-Dietrich Genscher as minister of foreign affairs. Genscher replaced Walter Scheel, who had been elected federal president in 1974.

Helmut Schmidt (SPD) continued the SPD/FDP coalition after Willy Brandt’s resignation. He had to deal with economic crises and the acts of terrorism committed by the Red Army Faction (RAF). Helmut Schmidt took over as chancellor after his fellow party member Willy Brandt resigned. He had to deal with the oil crisis, inflation and economic stagnation. Schmidt’s style was fact-oriented and efficient. He took a hard stance towards left-wing extremist group Red Army Faction (RAF), rejecting its demands. He had to step down as a result of a no-confidence vote in parliament. Helmut Schmidt, a less visionary and more pragmatic leader than Brandt, quickly developed the reputation as a highly competent manager of German economic and military affairs.

As a result of Brandt’s efforts and those of his successor, Chancellor Helmut Schmidt, a number of very restrictive and repressive policies were eased or eliminated by the East German authorities: the possibilities of limited travel by East Germans and, especially, by Westerners to East Germany were broadened. But the Wall and the fortified borders remained in place, even if some of the automatic shooting devices were removed, and the improvements in relations between the two Germanys made people on both sides of the border more resigned to the status quo.

Schmidt got along well with U.S. President Gerald Ford, but he had problems with Jimmy Carter. Schmidt was recognized for his competence in economic affairs, and he became increasingly critical of the Carter Administration’s economic policies. Carter, in return, thought that Schmidt sometimes acted like a schoolmaster with his allies, which did not help relieve tensions with them. In 1978, Schmidt and French President Giscard d’Estaing initiated the European Monetary System (EMS) with an Exchange Rate Mechanism (ERM) that was designed to secure the stability of currencies of EC member states and, among other things, protect them from American inflationary tendencies.

In 1976/77 the Soviet Union began deploying SS20 medium-range nuclear missiles that were directed against Europe. NATO thereupon adopted the NATO Dual-Track Decision that provided that medium-range nuclear missiles were to be deployed – mainly in Germany – if negotiations with the Soviet Union failed.

The Carter Administration urged the replacement of regular nuclear warheads with so-called “clean” neutron bombs that would kill enemy troops with radiation more than blast effects and therefore leave more buildings and infrastructure intact. Schmidt used up a great deal of political capital in his own party in accepting this proposal only to see it withdrawn abruptly a few years after it was first suggested. This did not help relations between Schmidt and Carter.

When the Soviets invaded Afghanistan in 1979 to put down an Islamic anti-Soviet government, the Carter Administration reacted strongly, including boycotting the 1980 Moscow Olympics. Like most of its European allies, the US was joined by Germany in the boycott and in the criticism of the Soviet invasion. On the other hand, the Germans argued that the Afghanistan issue could be separated from issues of Ostpolitik and general detente between East and West. The Americans disagreed, and tensions mounted between the U.S. and the Soviets, which the Germans saw as threatening their decadelong policy of improving political and economic relations with the Soviets and their Eastern European satellites.

A good example of the tension that developed between the U.S. and its Western Allies was the policy enunciated by the new Reagan Administration in 1981 that opposed the construction of gas pipelines from the Soviet Union to Western European countries. The Reagan Administration argued that these pipelines would make the Europeans dependent on Soviet supplies of energy and thus threaten the security of the NATO Allies. It ordered American firms and their European branches not to participate in the project, which had already been negotiated. The Europeans were incensed by this policy, seeing it as an unacceptable interference in their internal affairs and an illegal attempt to force European companies to abide by American laws. After much controversy, the Americans gave in, but at the cost of considerable irritation between the two sides.

In the meantime, the Soviets were preparing to modernize and upgrade their intermediate range nuclear missiles pointed toward Western Europe. These SS-20 missiles were mobile, more accurate, and armed with three warheads. Many experts believed they were designed to divide Europe from the U.S., because they could not reach the U.S. They said that this might tempt the U.S. to accept a nuclear threat or attack against Western Europe in order to save American cities from the threat of an attack from Soviet strategic missiles. Schmidt insisted that NATO had to answer the Soviet threat with new missiles in Western Europe aimed at the Soviet Union. In January 1979, the U.S., UK, France, and Germany met and declared their support not only for the Strategic Arms Limitation Treaty (SALT), but also for NATO intermediate nuclear missiles in Europe. In December of 1979, NATO announced its twin-track decision, according to which NATO would negotiate an intermediate missile agreement with the Soviets while rearming at the same time.

In 1973 the price of oil rose very quickly for the first time, mainly because of the war between Israel and the Arab states. The countries in the West suddenly realised how dependent they were on oil. Although West Germany came out of the crisis relatively unscathed, unemployment figures rose in the mid-1970s.

Schmidt was confronted with a number of serious problems. The economic turbulence caused by the oil crisis of 1973 had affected the FRG, and a ban on the use of automobiles on Sundays had been introduced to preserve scarce fuel reserves. Perhaps as a result of the crisis, Germans began to recognize limitations to economic growth and simultaneously to become aware of ecological dangers to the environment inherent in their lifestyle. As a result, environmental movements sprang up throughout the FRG.

Worries about the environment and about long-term economic growth became widespread in the next few years, and the almost limitless optimism of the postwar period began to give way to a mood of uncertainty about the future. Schmidt found himself face to face with a national crisis during the "German autumn," when the homegrown terror campaign of the leftist Red Army Faction reached its peak. Unemployment was also on the rise, and labor unions, traditionally reliable allies of the SPD, began to depart from their position of solidarity with the SPD-FDP government. In this increasingly difficult economic and political environment, Schmidt tried to steer a steady course, one often too conservative for his party and from which necessary support was at times lacking.

Chancellor Schmidt recognised that the economic problems could only be overcome if many countries cooperated. Together with French President Valéry Giscard d’Estaing he in 1975 established regular meetings between the most important economic nations. These annual “world economic summits” at which countries coordinate their economic and fiscal policy (among other things) are still held today. Helmut Schmidt’s government helped further ease relations between East and West in the context of the Organization for Security and Cooperation in Europe (OSCE).

As well as economic problems, Schmidt’s government had a second crisis to deal with: Some of the students who took part in the protest movement in the late 1960s formed a splinter group that wanted to fight the state with terrorist means.

In the autumn of 1977 West Germany was severely shaken by numerous murders. The Red Army Faction (RAF) kidnapped Hanns-Martin Schleyer, the President of the Employers’ Association, for instance, in an attempt to blackmail the authorities into releasing various prisoners. At the same time, an Arab terrorist group highjacked a Lufthansa aeroplane in another attempt to get RAF prisoners released.

A large crisis unit headed by the Federal Chancellor worked to try to save Schleyer’s life without giving in to the terrorists’ demands. In the end the GSG9, a special unit of the Federal Police, freed the passengers on the plane that had been highjacked on its way to Mogadishu. The RAF terrorists thereupon murdered the kidnapped President of the Employers’ Association. When they saw that their plan had backfired, the imprisoned terrorists killed themselves in their cells. It was thanks to the resolute action of Chancellor Schmidt and the collaboration between democrats in the parliament that the liberal state under the rule of law was protected against further harm.

During this time, Schmidt was losing control over his own party, which had become even pacifist and increasingly opposed to any new nuclear weapons in Europe. This opposition was expressed openly in party meetings as well as in defections of SPD members and supporters to the new Green movement, which was militantly pro-environment, antinuclear-power, anti-nuclear-weapons, and pacifist. This nuclear weapons issue, together with a declining economy, which seemed to challenge Schmidt’s reputation for competence in that field, placed him increasingly on the defensive.

Many people were against nuclear armament. A broad-based peace movement pressed for disarmament. However, negotiations with the Soviet Union initially failed. NATO deployed its missiles. It was not until 1987 that the United States and the Soviet Union agreed to disarm their nuclear weapons. Domestic policy debates on the Dual-Track Decision and on NATO’s future attitude to the Soviet Union led to a crisis within the SPD/FDP coalition. The two parties also had fundamental differences of opinion on economic and fiscal policy. In 1982 this led to the end of the coalition.

In September 1982, Schmidt's coalition partner, the FDP, decided to withdraw its support, and in a “constructive vote of noconfidence” joined with the opposition CDU/CSU in voting for a new coalition government under the leader of the CDU, Helmut Kohl.