On 6 November, no sooner had the victory of Donald Trump been confirmed in the US, creating huge uncertainty for Europe, than another critical election became inevitable, this time in Germany, a country being looked to for stability and leadership within the EU.
Trump has threatened a trade war with Europe in the form of 20% tariffs on exports to the US. With an economy teetering on the brink of recession, Germany would be the big loser if Trump sparked such a ‘tit for tat’ trade war with Europe.
Trump has also promised to end the war in Ukraine on “day one” of his Presidency and has supported Putin’s insistence on Ukraine neutrality, which would remove the prospect of it joining NATO, leaving Ukraine vulnerable, and diminishing any prospect of it joining the EU.
Germany, under its Social Democrat Chancellor, Olaf Scholz, has been the biggest EU donor of aid to Ukraine, totalling €37.32bn to date.
Collapse of the ‘traffic light’ coalition
The German government’s ‘traffic light’ coalition, led by Scholz, was formed in late 2021. The cabinet consisted of the Chancellor and 16 federal ministers. The Social Democrat Party (SPD) had eight ministerial positions, the Greens five and the liberal Free Democrats (FDP) four.
The coalition government committed to a ‘progressive’ programme, but soon ran into problems with the outbreak of the war in Ukraine in February 2022, especially in the light of Germany’s dependence upon Russian gas.
The plans of the SPD to improve the welfare state, and those of the Greens to combat climate change, were significantly affected by the need to provide weapons to Ukraine and embark on a massive rearmament programme at home.
There had been evident cracks in the three-way ruling coalition for some time, with each of the parties advocating different solutions to Germany’s economic woes. In what appears to have been a pre-planned exit, the liberal Free Democrat, Christian Lindner, produced a policy paper demanding changes to fiscal, social and climate policy which were clearly unacceptable to the other coalition partners. He was finally sacked by the Chancellor on 6 November, leading to the resignation of all but one of the other FDP ministers.
Dispute about debt
The pro-business free-market FDP had been preoccupied with preserving the country’s ‘debt brake’ (a constitutional cap on borrowing). The SDP and the Greens both wanted to reform this, to enable further funding for Ukraine and investment in green infrastructure, but Lindner, the liberal Finance Minister, had defended it.
With Germany in danger of experiencing its first two-year recession in over 20 years, this presaged a potential fiscal hole of €13.5bn in the next year’s budget.
Early election
An election had been due in September 2025, and at the time of Lindner’s sacking, Scholz said he now anticipated a parliamentary vote of confidence in January, with an election next March.
However, a delayed election (which might not have resulted in a new German government until next summer) would have had consequences, not only for Germany, but, as Europe’s largest and most powerful nation, for the EU as well.
In the event, the leader of the opposition Christian Democrats (CDU, the former conservative party of Angela Merkel) Friedrich Merz, whose parliamentary group includes the Bavarian Christian Social Union (CSU), insisted on an earlier timetable.
The confidence vote, which Scholz (currently the leader of a minority government led by the SPD, with Robert Habeck’s Greens) is widely expected to lose, will now take place on 16 December, with elections planned for 23 February 2025.
Scholz or Pistorius for the SPD?
Some Social Democrats have campaigned for the replacement of Scholz with his more popular defence minister, Boris Pistorius, an anti-Putin ‘Ukraine hawk’. However, Pistorius is supporting Scholz and it seems that the higher echelons of the SPD do not want “another Kamala experience”, so would rather stick with the current Chancellor as their candidate.
A CDU-led coalition?
Merz (a former CDU MEP and a former chair of Black Rock Germany) would appear to be the likeliest successor to Scholz as Chancellor, although some think that his wealth and business background may play against him. Straight talking and combative in style, he has sometimes been accused of adopting the rhetoric of the far-right AfD.
With the CDU plus CSU group leading opinion polls at 33% (more than the combined share of the three parties in the former coalition) the conservatives seem likely to lead the next government. To do so, Merz is likely to need at least one other coalition partner. However, along with the other mainstream parties, the CDU has committed to a ban on cooperation with the extreme right.
Extremes of right and left
Extremist parties have been gaining more power at the state level. In recent elections in two former communist states in east Germany, Thuringia and Saxony, the far right finished a very close second to the CDU. In a third eastern state, Brandenburg, the SPD pulled off a surprise victory, following tactical voting to exclude the AfD, which came second.
However, this left the SDP in Brandenburg potentially having to negotiate with the left-nationalist BSW, led by former Left (Linke) MEP Sahra Wagenknecht, which came third and advocates left-wing economic policies and peace talks with Moscow in relation to Ukraine. Merz has also now given permission to CDU regional parties to negotiate with BSW, in the absence of a viable alternative.
Lame duck coalition
There is talk of the current ‘lame-duck’ coalition cooperating with the CDU on some measures of common interest, before the change of government, to create safeguards against the extremist parties.
For example, if the far right ‘Alternative for Germany’ (AfD) party and the far-left BSW were to gain over 33% of the votes, this would give them a blocking minority in relation to the selection of judges for the Federal Constitutional Court – the equivalent of the US Supreme Court. This possibility could also apply to the easing of the debt brake.
Merz has recently dropped hints that he might be willing to reform the debt brake (originally introduced, with CDU backing, in 2009). The Economist is now advocating that Merz should act now, in conjunction with the SPD and the Greens, to do this, to pre-empt the change being blocked by the AfD and BSW after the election in February 2025.
UK-German treaty in doubt
The hiatus of government in Germany will have one specific unwelcome consequence for the UK. This is progress on a new UK-German bilateral treaty, as part of Keir Starmer’s ‘ambitious’ wider re-set with Europe, announced by Chancellor Scholz and Prime Minister Starmer during the latter’s first bilateral visit on 28 August.
The meeting was the fifth time Starmer had met Scholz since taking office. The aim was to sign a bilateral treaty by early next year on defence and economic ties; although there was no sign of Starmer relaxing his ‘red lines’, and economic issues are only likely to be progressed through the forthcoming talks with Brussels relating to the review of the UK/EU Brexit Trade and Co-operation Agreement (TCA) expected to start in 2025.
The hoped-for UK-German treaty will now be put ‘on hold’. With an uncertain future, thanks to Brexit, the UK finds itself politically adrift, without influence or privileged access to either of the world’s two largest markets.
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