Germany: Country set for continuity in upcoming federal elections
August 28, 2017
Germans will head to the polls on 24 September to elect a new legislature after a campaign that has been described as predictable and lacking in-depth policy discussion on key issues. Angela Merkel’s ruling Christian Democratic Union (CDU) is currently leading the polls with 38–40% of voting intentions, almost guaranteeing a stable and market-friendly outcome. Despite the many coalition options being discussed, the election is unlikely to result in any significant policy changes. The German political system functions largely by consensus, which has been Merkel’s preferred course of action. As such, any large-scale tax cuts or investment plans announced by the parties as they jostle for voters are likely to be watered down, even as the country’s fiscal surplus remains large. Yet since the current election has generally lacked extensive discussion of certain key issues, principally because the current economic narrative is positive, there may be a downside risk in the long term. Policymakers have so far failed to address important challenges that lie ahead, such as the country’s rapidly aging population, which requires large-scale investments in infrastructure and technology, as well as a reevaluation of the pension and education systems.
The election campaign has solidified Merkel as an indomitable figure in Germany’s political landscape. She has deftly navigated the challenges from the opposition, while framing herself as a safe choice in an age of uncertainty who managed to preside over an economic success story. She regained most of the ground she had lost in the immediate aftermath of the refugee crisis in late 2015, when her approval ratings plunged, and again following Martin Schulz’ nomination as Party Chairman of the Social Democratic Party earlier this year, which saw the SPD pull even with the CDU before eventually collapsing as fast as it had risen. Merkel’s current coalition partner, the SDP, is polling far behind at 22–24%. Trailing the two main parties are the ecological Green party, the far-left Left party, the liberal Free Democratic Party (FDP) and the far-right Alternative for Germany (AfD), which are all polling at around 7-10%. If the current numbers hold up on election day, all six parties (seven if the CDU’s Bavarian sister party the CSU is counted separately) will enter the Bundestag, up from only four (five) at present.
While the outcome of the election seems to be an almost a foregone conclusion, the real political battle will be fought in its immediate aftermath during coalition negotiations. Angela Merkel and the CDU/CSU will likely capture the largest share of the vote and will therefore finish in the driver’s seat. A coalition with the FDP, the CDU´s traditional coalition partner, could be possible. Both are campaigning on a platform of tax cuts, but a sticking point could be European policy, where the liberals have taken a more hawkish approach. It also remains to be seen whether the FDP, which has been out of frontline politics for the past four years after having missed the 5% hurdle in the 2013 elections, will want to be join forces with a chancellor who has a track record of eclipsing her coalition partners.
Another possible coalition would be with the Green party, provided it can gather enough support in Parliament. The Green party has shifted to the center by naming two prominent liberal figures as its lead candidates. Although they share similar ideas on Europe with the CDU, it could be difficult to find common ground on environmental policy: The Green party is strongly in favor of eventually banning internal combustion engines, a position at odds with the CDU, which defended the all-important car industry in the recent diesel emissions scandal. A so-called Jamaica coalition (because of their respective colors) between the CDU, FDP and the Greens would provide a solid majority but could prove politically fragile given the stark disagreements on foreign and European policy. And, finally, another grand coalition between the CDU and SPD remains a distinct possibility. However, it is equally imaginable that the SPD would prefer to be in opposition after a bruising four years in coalition, which are expected to deliver the party´s all-time worst electoral result.
Author: Christopher Mc Innes, Economist