Germany’s Recent Election: The Unlikely Power Brokers

Germany’s Recent Election: The Unlikely Power Brokers

The opening of Germany’s 20th legislative period on 26th October 2021 made headlines for many of the reasons most German Bundestag elections do – Germany’s global economic might and political influence in the EU, the world’s largest trading bloc. It also signalled the departure of the country’s longstanding Chancellor, Angela Merkel, as the head of the government, having held the position since 2005. However, aside from the long-anticipated exit of one of Europe’s most familiar political figures, this election also marks the consolidation of political trends set in motion long before voters cast their ballots this September.

The country’s two ‘big tent’ political parties, Merkel’s CDU and, on the centre-left of the political spectrum, the SPD, each received one of their lowest vote shares post-WWII. In fact, alongside its Bavarian sister party the CSU, the two centre-right stalwarts of German politics received the lowest vote share in their history. In 2005, the SPD and CDU/CSU received over 70% of the votes cast, this time not even managing to cross the 50% hurdle to form another grand coalition.

Fragmentation and Complication

This fragmentation clearly reflects changing attitudes – it is the first time since 2002 that the SPD has overtaken the ‘Union’ and is the second election in a row where both the liberals (FDP) and Greens have improved their vote share. This also complicates coalition talks, as Germany’s third and fourth most powerful parties together now hold more seats than the overall winner, the SPD. This also means Germany’s first federal-level three-party coalition, although such a formation is precedented at state-level legislatures.

The FDP’s Christian Lindner, emboldened by his party’s bounce back from near irrelevance in 2013 when it narrowly missed out on reaching the critical 5% threshold for federal representation, and with an eye on the country’s powerful financial ministry, began early exploratory talks with the Greens.

They make for unlikely partners: The Greens want Germany’s fiscal conservatism to be liberalised, and along with it a debt break, to enable more borrowing for largescale green investments. This is opposed by the Liberals, who also disagree about the former’s ideas on income and wealth taxation. This also translates to their respective views on EU spending: The Liberals favour a rigorous adherence to the EU’s Stability and Growth Pact on fiscal rules, whereas their likely future coalition partners want it renegotiated and relaxed. Unsurprisingly, the Greens also have much more ambitious environmental policies, including faster carbon neutrality and higher investment in public transport.

Political Risks

Gone is the paradigm in which the Liberals, who favour a smaller state and commensurately lower taxes, as well as less intervention, are naturally the party of business. The Greens have been able to widen their appeal, including to business executives, in no small part thanks to widespread concern among Germans about environmental issues and the necessary green transition. This is thanks to their openness to discussion with business and industry about said transition, and the sustainability of current practices.

Speculation abounds about the formation of the next cabinet, with Lindner tipped to be the next finance minister, and the implications for both domestic and EU-level fiscal policy. He wants the spending pact to be reinstated once its suspension (due to the pandemic) ends. This risks causing tensions in the EU, as some view the relaxation of spending rules as essential to enable economic recovery, especially in Southern Europe. Moreover, it would be much easier for a country like Germany to implement, as well as others who back such measures, like Austria and the Netherlands, than those in economically less sound positions to the East and South.

The concern is that forced austerity will drastically temper public investment and cause a populist backlash, with a country like Italy being the typical candidate for such a chain of events. As such, a fiscal conservative in the position of German finance minister is deemed by some as a systemic risk to European stability.

However, the role of Germany’s finance minister as a consensus seeker in Europe suggests institutional rigidities may override the ambitions of Lindner, should he succeed in attaining the influential role. As it stands, his party has entered formal coalition talks with the Greens and SPD, with the Union set to move into opposition for the first time in 16 years. The formation of a government between the three seems highly likely given the fact that formal talks have commenced and red lines drawn, as set out in a paper published before talks began.

Categories: Europe, Politics

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