German finance minister Jörg Kukies: ‘We’re all affected’

Germany’s finance minister is 45 minutes late — his train from Frankfurt delayed, yet another casualty of Deutsche Bahn’s notorious unpunctuality. A fitting start, I think, since we are to discuss, among other things, the country’s massive spending plan for its derelict infrastructure.

Jörg Kukies, the former Goldman Sachs banker whom Chancellor Olaf Scholz promoted to finance minister a little less than four months before the general elections on February 23, has chosen to meet in a popular Franco-German restaurant in the west German city of Mainz, where he grew up. Anxious, emoji-laden text messages keep me updated on the disruption: this time the result of people on the track rather than under-investment. I reassure my guest that 7pm was too early for a proper French dinner anyway, and that I have ordered the amuse-bouche — omitting the detail that it is strangely described as “French porn”, in English, on the menu.

Mayence, as he insists on calling his hometown, has a strong Gallic heritage, he reminds me after finally appearing and settling down. It held Germany’s first elections after being annexed by Revolutionary France. Napoleon later established his quarters here and even donated a bell to the cathedral. “You see, it’s all very French here — you should feel at home.”

I glance around and feel unmistakably in Germany: Weinhaus Bluhm occupies the low-ceilinged ground floor of a half-timbered house in the old town. By 6.45pm, when I arrived, it was already dark and packed with diners well into their supper.

The establishment is run by Chefin Murielle, an opera singer who took over from her French-born father, the late Pierre, a “legend” of the Mainz club and culinary scene. “This place absolutely rocks during Carnival. I remember a lot of wild nights in this place,” says Kukies.

After making our order — goat’s cheese salad and Hackbraten, a German-style meat loaf, for him, Spundekäs (soft cheese) followed by fish soup for me — the 57-year-old explains that his family still lives near Frankfurt, a half-hour drive away. When Scholz, then finance minister, brought him in as a top aide in 2018, his wife stayed behind. “She asked me, if I move to Berlin, ‘how many times per week will I see you?’ Over the first few months I was always in Brussels, Rome, Paris, everywhere. When I was in Berlin, I had dinners and parliamentary sessions. She was like, ‘OK, that doesn’t make sense, right?’”

Kukies begins with a glass of Pinot Gris. I take a sip of Riesling, and dip into the amuse-bouche, a vegan aioli — “French porn”, it turns out, is a reference to “porno”, a word German youths in the 1990s used to mean “amazing”.

We are meeting on the eve of Donald Trump’s “liberation day” and conversation quickly turns to its potential impact on Germany. The (now paused) blanket tariffs on US imports — 20 per cent on EU goods — would deal a severe blow to Europe’s largest economy, an export-oriented nation. Its growth engine has ground to a halt for the past three years as its equipment and vehicle manufacturers struggle to fend off cheaper Chinese rivals at home and in export markets.

Kukies travelled to Washington the week preceding Trump’s announcement to meet officials including US Treasury secretary Scott Bessent, trade representative Jamieson Greer, Federal Reserve chair Jay Powell and “every Trumpian think-tank you could imagine”. He came back convinced that the Trump administration was “on autopilot” and going “full speed ahead”.

Think-tanks that have supported Trump admitted privately that tariffs were “bad”, a “tax” on consumers and businesses, he confides. “Everyone I spoke with said that they want to find an agreement, but where that ends and whether it’s an agreement that will be acceptable, nobody knows. And for us, of course, that’s really, really . . . ” he leaves the sentence unfinished. The US accounts for about one-tenth of Germany’s exports. “Although, we’re all affected,” says Kukies.

“How should Europe respond?” I inquire. “What the [European] Commission is doing is exactly right,” he says. “On the one hand, saying we should negotiate, we should actually go down in tariffs, not up. But if the other side refuses to negotiate, we have to react. Inflict pain ourselves.”

Kukies knew his stint as finance minister was likely to be short given the slim re-election prospects of his deeply unpopular boss — and sure enough, Scholz’s Social Democrats (SPD) secured barely 16 per cent of the vote, its worst national results since 1887. What he had not foreseen was just how intense and consequential the job would become.

Days after winning the elections in February, the leader of the conservative Christian Democrats (CDU) Friedrich Merz rushed to amend the constitution to allow unlimited borrowing for the military. Shaken by Trump’s threat to curb protection of Nato allies, and his willingness to agree a quick settlement with Russia over Ukraine, Merz found himself grappling with the same intractable problem that had precipitated the collapse of Scholz’s coalition: the so-called debt brake. Introduced in 2009 to shore up public finances after the global financial crisis, it limited new borrowings to 0.35 per cent of GDP.

The chancellor-in-waiting realised he would fall short of the supermajority needed in the newly elected Bundestag to loosen what economists routinely describe as Germany’s “fiscal straitjacket”. The far-right Alternative for Germany (AfD), which finished second with more than a fifth of the vote, and Die Linke, the far-left, together secured more than a third of the seats — and both opposed the reform. Merz was left with no choice but to strike a deal with the SPD — his only viable coalition partner — and the Greens to push the amendment through the outgoing parliament. He had just one month.

That is how Kukies, as acting finance minister, ended up playing a central role in structuring a €1tn debt package to modernise the country’s army and infrastructure — putting government spending on a path unseen since reunification in 1990.

The spending plan should help cushion Trump’s tariffs, which economic think-tank the Ifo Institute says could tip the Eurozone’s largest economy into contraction this year. “It gives us hope for big economic progress,” Kukies says. “And whatever Nato agrees in June, we can fund any defence spending increase.”

He fumes at the “completely pro-Russian stance” of the AfD and the “unbelievably naive argument of the extreme left that there is no need to increase defence spending”. The former, whose ratings have increased since the elections, have morphed from “a group of Eurosceptic professors” into “something very threatening and very dangerous” with fascist elements, Kukies says.

“I can only hope that with the [spending] package, we convince the broad public that they simply don’t have any solutions.”

Germany’s shift in fiscal policy was so massive and so sudden that it triggered a sharp increase in borrowing costs across the Eurozone. Kukies remembers his first meeting with his European counterparts after the unveiling of the package. “I had some colleagues greeting me and saying ‘thanks for increasing our bond yields by 40 basis points, thanks for this contraction in financial conditions’,” he says. “But that was more joking because, of course, everyone, or the vast majority, wanted more expansionist fiscal policy from Germany.”

He confides that he had former UK prime minister Liz Truss and her fateful “mini” Budget in mind. “Every finance minister is afraid of this Truss-Kwarteng moment,” he says.

“We did talk to a lot of people who buy our bonds . . . We were able to calibrate things with some big investors,” he says. “Day one, yes, bond yields did spike quite substantially and the Bunds sold off. But equities rallied, the euro strengthened, credit spreads didn’t widen — all the sort of collateral things that went wrong when Liz Truss made her statements.”

“Now we need growth,” he says.

In the weeks that followed the deal on the spending package, business sentiment improved — a precursor to higher growth. Before Trump’s tariffs, economists estimated that the economy could grow 2 per cent as soon as next year. But Germany must also revive its long-term growth potential through structural reforms, Kukies says.

---

Our entrées arrive and I discover that Spundekäs comes with excessively salty Brezels. My guest tucks into an oversized slice of roasted goat’s cheese next to a spinach and red onion salad.

Kukies spent nearly two decades selling structured products and derivatives at Goldman Sachs in London and Frankfurt, but politics came first. He headed the SPD’s youth wing for the state of Rhineland-Palatinate. The Jusos (Young Socialists) are traditionally more leftwing than their party elders, but he claims he was “moderate”.

“My family was very decidedly left-leaning but never party members,” he says. His grandfather was a truck driver and his mother was the first child in the family to graduate from high school, he says. As a child, he lived in California where his father was an IBM engineer. Back home he went to his first demo to protest against CDU chancellor Helmut Kohl cosying up to South Africa’s apartheid regime.

When he had an opportunity to study economics in Paris, he picked the Sorbonne over the more prestigious Dauphine in the 16th arrondissement. “I went to the Panthéon and Quartier Latin and Boulevard Saint-Michel and it was vibrant and there was a lot going on, and I’m like, ‘I don’t care about any recommendations of what’s academically better.”

I challenge him to try his French on me and he obliges, with little accent and using the familiar “tu”. When he landed his first job at Goldman’s London trading room, after studying at Harvard and Chicago Booth, he was able to use the language again with polytechniciens — the maths whizz-kids from France’s École Polytechnique who form big contingents in the Square Mile. “There was one Italian, a Swiss, but the language on the desk was French,” he says.

Made partner in 2010, Kukies moved to Frankfurt as co-head of the bank in Germany. There he kept in touch with Andrea Nahles, his successor at Rhineland-Palatinate’s Jusos, who later became SPD leader. Then he was asked by local SPD politician Thorsten Schäfer-Gümbel why it was so rare in Germany for people in business to move into politics. “I said, ‘Well in Germany, people in business never get asked.’ And his response was, ‘You never get asked because we know you’d say no,’ and I’m like, ‘Try me, you never know,’ right?”

When in late 2017, then-chancellor Angela Merkel turned to the SPD to form a coalition, he received a text from Schäfer-Gümbel: “Do you still mean what you said?” Then a few months later he received another one, this time from Scholz, who had just become finance minister. Their first meeting, which was to last 30 minutes, “turned into two hours”, he says.

Was it hard to leave a seven-figure salary for something more to the tune of €150,000 a year, I ask. “In the grand scheme of things, it’s very well paid,” he says. His appointment was met with criticism. With the global financial crisis still fresh in people’s minds, one leftwing politician noted that Scholz was “making the arsonists the fire brigade”.

“I was well prepared for that. It’s just the way it is. Every time someone moves from an investment bank into politics, there are people who criticise it, right?”

---

By now we are working on our mains. The fish soup is thicker than I am used to, but I appreciate its generosity — clearly a trait of our host Murielle. My guest seems content while battling with a gigantic piece of meat loaf on mashed potatoes.

He joined a team of experts including Wolfgang Schmidt, a close Scholz aide, and Werner Gatzer, who in 2014 as top budget official under former finance minister Wolfgang Schäuble achieved Germany’s first balanced budget since 1969. The debt brake, which took effect in 2016, was popular but easy to comply with thanks to growing tax receipts and ultra-low interest rates.

Then the Covid pandemic hit and Kukies helped devise a €550bn “bazooka” rescue plan. Two years later, and only a few months after Scholz had been elected chancellor, Russia launched a full-scale invasion of Ukraine, forcing Germany to wean itself off cheap Russian gas within a year. Kukies had followed Scholz to the chancellery as sherpa in charge of international summits.

“The debt brake did have its advantage of making sure that in the good time after the euro crisis, the budget consolidated again and we regained firepower to be able to react to this crazy corona [pandemic] and the Russian invasion,” he says. “With the benefit of hindsight, you could argue that, between 2015 and 2019, we shouldn’t have neglected infrastructure so badly, right? I mean, fair point.”

Was Scholz’s bickering coalition with the Greens and the Free Democrats (FDP) such a nightmare? Kukies became finance minister in November when FDP leader Christian Lindner was sacked by Scholz, which set in motion early elections. “It certainly wasn’t easy to manage,” he says, pointing out the unprecedented challenges of the Ukraine invasion. “We had scenarios that were quite scary.” Blackouts? “Yeah. We looked straight into the abyss at some point, right? Just imagine, in 2021, more than half of our gas came from Russia.”

I ask what he makes of the handful of CDU MPs who have advocated an activation of the Nord Stream 2 gas pipeline. “Nonsense,” he says.

As I note that the EU’s Franco-German motor had stuttered under Scholz, Kukies begs to differ. They may have different economic traditions, but “on all of the really big issues Germany and France came together”, he says, listing the response to the pandemic and the war. “We would not have been able to seize €300bn of Russian assets in three days,” he says.

But he is frustrated about their “dysfunctional” relationship over energy and how to decarbonise. Initiatives from Paris, a nuclear power champion, have met “antagonistic” responses from Berlin, which is pushing renewables, he says, “instead of saying, OK, we accept a different starting point, a different strategy and we live with it, and we do the best to enhance the efficiency of the systems”.

It is nearly 10pm and we are the last customers, but the kitchen takes our dessert order — a trio of crème brûlée, lemon tart and pistachio cheesecake. Clearly Kukies would happily stay on as finance minister, but the laws of politics do not play in his favour. Merz reached a coalition deal last week and should be elected chancellor in early May. The word is that SPD co-leader Lars Klingbeil has his eye on Kukies’ job — and the spending package.

Will my guest go down in history as the busiest interim German finance minister ever? “I don’t know, but I don’t care,” he says. He wants to do his job fully, he says, like going to Washington to get a sense of the potential harm to come. He is conscious that he is no party heavyweight. Kukies serves us water, then picks up my glass accidentally and drinks from it. He swiftly turns to the waitress to get me another.

I suspect he is already receiving job offers from universities and hedge funds. I also suspect he might try to move back to this pleasant corner of Germany. “Politics works the way it works,” he says. “And that’s fine.”

Anne-Sylvaine Chassany is the FT’s Berlin bureau chief

Find out about our latest stories first — follow FT Weekend on Instagram and X, and sign up to receive the FT Weekend newsletter every Saturday morning