SOne-day elections in Germany ended an astonishing election campaign unprecedented in the country’s post-war history. Angela Merkel’s Christian Democratic Union suffered a crushing defeat, not only losing around a quarter of her share of the vote, a number of important constituencies – including the one Merkel herself held – but also ending up in the third place in three of the eastern German states, behind the social democrats and the populist right AfD.
Since 2015, the Christian Democrats have grown from being the dominant force in German politics, almost invincible and the only dominant party or Volkspartei, to a party in disarray, with significant internal power struggles, impoverished of political ideas and rocked by corruption scandals, with CDU politicians who made personal gains from the pandemic through mask deals controversial.
The Social Democrats, widely seen as a strong contender for the election only six months ago, have made a remarkable comeback, finishing first in the popular vote and gaining substantial support in the eastern states. Their candidate, the experienced Finance Minister Olaf Scholz, presented himself as the true heir to Merkel’s political style, combining rational thinking and personal modesty.
Both parties lost their status as dominant political forces; neither was able to attract more than 26% of the vote, and each needs two more parties to form a government. The Greens and the Free Liberal Democrats (FDP) are kingmakers and can side with the Conservatives or the Social Democrats. They are not natural allies, because the selling points of the FDP are market liberalism and fiscal austerity, while the Greens are closer to the Social Democrats on fiscal and social policy and propose that a strong state is necessary to face the climate crisis.
However, the two parties agree on other points. Both wish to promote innovation and digitization, but also human rights and migration. Although fiscally hawkish, the FDP is very friendly towards the EU and supports further steps towards a closer union. On climate change, the FDP favors more commercial instruments, which the Greens are not opposed to. Both would agree that Germany’s best contribution to solving the climate crisis would be to become a leader in climate-friendly technologies, thanks to the highly successful German Mittelstand of small and medium-sized enterprises and the country’s engineering base.
Greens candidate Annalena Baerbock made numerous visits to the business community during the election campaign, with at least some companies appreciating her understanding of the issues they face and her support in solving them. There is substantial common ground between the two parties regarding the need for a policy promoting technological solutions to current challenges.
The green / liberal force also represents a generational change in German politics. Among the first-time voters, the FDP obtained first place with 23% of the vote; the Greens come in second with 22%. The old one Volksparteien, the CDU and the SPD, meanwhile, were far behind. Their electoral support is focused on the elderly, who represent 30% of the electorate. The two big parties are trying to seduce the elderly with a retirement policy and also by promising to maintain the status quo. If the Greens / Liberals are now in the driver’s seat, it is a challenge to the dominance of the elderly in the policymaking of previous governments. The SPD has already started recruiting younger MPs; about a third of the newly elected deputies are under 40 years old. Within the CDU, a movement exists to break the monopoly of older politicians, such as Wolfgang Schäuble, former finance minister, who are seen as responsible for choosing Armin Laschet, seen as a desperate candidate with low odds approval.
The biggest challenge for a forward-looking, pragmatic coalition government is to find lasting compromises on thorny issues. In a three-way coalition, key political positions must be defined before the government takes office.
Austere fiscal policy and balanced budget rules will limit public investment in innovation and the necessary infrastructure. The three parties will need to come up with new ideas for mobilizing public investment, either through an investment fund or by reallocating existing grants for new investments.
Market solutions to tackle climate change are likely to exacerbate social inequalities and could push up the prices of mobility and housing. Germany fears popular discontent with climate policies if income is affected. Finding mechanisms to compensate low-income households for the higher costs that climate policies will incur is a political priority.
Finally, on Europe, the new government will have an important word on the European fiscal framework and the prospects for the EU’s Covid recovery fund. Here, the influence of the Greens / FDP parties should strengthen European decision-making despite the hawkish stance of the liberals.
As the smaller parties decide who they would choose as chancellor, the message that will emanate from the new government is already taking shape: Angela Merkel is passing the baton to a younger generation of politicians, less attached to the old center-left and center-parties. law. The new chancellor will come from one of the old parties; policies, however, will be shaped by young people.