Berlin Cable

September 27, 2021

Germany Cautiously Steps into the Post-Merkel Future

Prolonged talks? Messy politics? Merkel still not gone by New Year’s? Actually, Germany may have a new government more quickly than many think.

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A combination of four images shows placards of Germany’s top candidates for the September 26 German general elections being placed on large boards. The top row shows Armin Laschet of the Christian Democratic Union Party CDU and Olaf Scholz of Germany’s Social Democratic Party SPD. The bottom row shows Greens Party candidate Annalena Baerbock and Christian Lindner of the Free Democratic Party FDP, in Bonn, Germany, September 20, 2021.
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After 16 years with Chancellor Angela Merkel at the helm, Germany will be getting a new government. When exactly is anybody’s guess, but it already seems quite likely that it will no longer be led by her center-right Christian Democrats (CDU) and their Bavarian sister party the Christian Social Union (CSU). With the fog settling after a remarkable election night on September 26, preliminarily results published early the next morning confirmed a win for the center-left Social Democrats (SPD) led by Finance Minister and Vice Chancellor Olaf Scholz.

The SPD came first with 25.7 percent of the vote. The CDU/CSU, led by Armin Laschet, registered a historically bad result with 24.1 percent. The Greens came third with 14.8 percent, the pro-business Free Democrats (FDP) fourth with 11.5 percent. Translated into government options, the alternatives are now an SPD-led “traffic light” coalition with the Greens and the FDP, or a CDU/CSU-led “Jamaica” coalition with the same two smaller parties. Yet another SPD-CDU/CSU “grand coalition” is also there as a fallback option.

On election night, both Scholz and Laschet, the former with more reason and logic than the latter, claimed the chancellery, while the Greens and FDP left them both dangling. The two smaller parties would perhaps talk first with each other, suggested FPD leader Christian Lindner and Greens co-leader Robert Habeck, since the gaps between them were the widest. The not too subtle message: The time of Germany’s “big tent” people’s parties, the CDU/CSU and SPD, are over—we are kingmakers now.

An Unsurprising Result

This situation is exactly as predicted by the polls for weeks. Still, many observers, especially international ones, found themselves surprised—and worried. “Messier politics ahead,” warned the New York Times. “A near deadlock,” was The Guardian’s assessment. “German elections likely to extend Merkel’s long goodbye,” predicted the Financial Times.

But “messy” coalition building is how the German systems works. Yes, the process has become more of a prolonged affair recently. In 2017-18, it took Merkel almost six months (178 days), largely because her first attempt at a “Jamaica” coalition had to be aborted when Lindner pulled the plug. In 2013, it took 83 days, which was already unusually long.

In the 1990s and 2000s, however, the duration alternated between 30 and 60 days—and there is reason to believe that it may turn out a little less complicated this time round than widely expected. All sides have learnt from the experience of the “Jamaica” failure four years ago. Scholz signaled early on that he would accommodate the FDP more fairly than Merkel had been willing to last time round.

Habeck, while not excluding a coalition with the CDU/CSU, on Monday morning made clear in a radio interview that “traffic light” was the preferred option. However, his party and the others needed to find a raison d’etre, an animating spirit for such an undertaking that was more than the sum (or pet projects) of its parts. It is quite likely that Lindner and the FDP will play ball, marrying the Greens’ transformational climate policies with “market-liberal” elements the Free Democrats are pushing for, while Scholz and the SPD will be making sure that Germany’s social fabric does not get torn too much in the process.

Go Traffic Light

In fact, the political contours of a traffic-light coalition are already quite clear. In exchange for conquering the finance ministry, Linder and the FDP will likely support the SPD and Green policy of increasing the minimum wage to €12 per hour and possibly go along with the decreasing income tax for lower-income earners. While probably killing any “wealth tax” proposals, the FDP may even go along with slightly higher taxes for the highest income-earners, provided the “overall tax burden” is not increased.

In terms of fiscal policy, an SPD-Green-FDP coalition would return to the debt brake in 2023, but would make the transition a little less steep, making any unspent funds and new debt of €100 billion already agreed for 2022 last longer, by using it for digitalization and making Germany carbon-neutral by 2045, an ambitious goal set by the Merkel government after the country’s Constitutional Court intervened, ruling that the existing Climate Law was unconstitutional as it was not ambitious enough. Then again, German industry and society is ready for these big changes, provided you have a “can-do” government and an assurance that it will all work out fairly.

In terms of foreign policy, it is striking that while the Greens and FDP disagree on many things, they converge on demanding a tougher line on China, and also on Russia, which means the future German government can be expected to be more hawkish toward both. Sticking points are European policy, where the FDP is averse to deeper integration. However, a Chancellor Scholz, while adhering to the agreed fiscal and debt rules agreed under the Stability and Growth Pact, will likely use any wriggle room to make life a little easier for the EU’s highly indebted economies. For Germany’s allies and friends, a Scholz government will be an opportunity, with the SPD even ringfencing expenditure for security (internal and external), which will likely include defense spending.

The Center-Right on Shaky Ground

For Germany’s center-right, meanwhile, the election result is a terrible blow. In a divided party, many expected Laschet to do badly, but losing against an SPD that was trailing at 13 percent just half a year ago and was no longer deemed to be much competition is deeply hurtful for a political force until now often described as “Europe’s most powerful party.” Laschet’s insistence on election night that it isn’t over and another attempt at “Jamaica” is quite possible smacks of buying time. The prospect, however tenuous, of staying in power is enough for now to keep the CDU/CSU united behind him while he fights for his political survival.

But the fact that a number of cabinet ministers including Defense Minister Annegret Kramp-Karrenbauer, Economy Minister Peter Altmaier, and Merkel’s chief-of-staff at the chancellery, Helge Braun, lost their direct mandates speaks of a party in deep disarray. Someone will have to accept responsibility at some point, and it will likely be Laschet. Another move by the party’s right-wing, possibly led (yet again) by a Friedrich Merz who simply won’t take “no” for an answer, looks likely. It would propel the CDU/CSU, tempted by outdated 1990s economic thinking and populist gesture politics à la Austria’s Sebastian Kurz, into opposition, likely for years to come.

On Sunday, Germany’s electorate opted for change, albeit cautiously. The political center is being reconfigured, but it is also expanding. The far-right Alternative for Germany (AfD) lost a bit of their support and will, while still in parliament, no longer be Germany’s biggest opposition party, irrespective of the sort of coalition that will be built. And the hard-left Linke party, which wants Germany to leave NATO and the EU, dropped below the 5-percent hurdle for the first time and will only be in parliament thanks to winning three seats directly. Its poor showing means there is no prospect of a left-wing coalition of the SPD, Greens, and Linke, something that is likely to be welcomed by Germany’s allies.

Germany is on its way to a post-Merkel future, and it may well start this journey at home and abroad more quickly, and possibly more boldly, than many expected. Seen that way, maybe the election result is a surprise.

Henning Hoff is Executive Editor of INTERNATIONALE POLITIK QUARTERLY.

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