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Germany is getting ready to turn the page on sixteen years of government with Angela Merkel at the helm. There will be no shortage of challenges facing the next government, which will have to contend with reforming pensions, putting public investment on a sustainable footing and negotiating the needed green transition.

Who are the main candidates and what do they stand for?

The Conservative Union parties (CDU/CSU) are ranged behind Armin Laschet, currently premier of the North Rhine-Westphalia region. He is running on a platform of fairly moderate centre-right reforms, with an emphasis on quickly reapplying the “debt brake” and lowering Germany’s debt-to-GDP ratio. On pension reform, the party wants to keep the rules around pension contributions and benefits unchanged but beef up the private supplementary pension system.

The Social Democrats (SPD) have put their money on experience in government with their choice of Olaf Scholz. He is proposing raising the minimum wage to €12 an hour, increasing family allowances and keeping the level of pensions unchanged. The SPD is advocating for a social policy financed partly by a new wealth tax and partly by taking on more debt, though without contravening the constitutional debt brake.

The Green candidate, Annalena Baerbock, is pursuing a more ambitious green agenda than the outgoing government. Under her policies, public investment would increase by €50 billion a year until 2030, which would mean easing the debt brake for longer.

The Liberal Party (FDP) candidate, Christian Lindner, intends to reduce the corporate income tax rate and lower taxes on middle-income earners. When it comes to deepening monetary union, he is intentionally conservative: he is against risk-sharing between countries within the banking union but in favour of quickly reapplying the rules of the Stability and Growth Pact and creating a sovereign debt restructuring procedure under the supervision of the European Stability Mechanism.

Heading up the radical left (Die Linke) are Janine Wissler and Dietmar Bartsch. Their agenda revolves around raising basic welfare benefits and pensions and lowering the official retirement age to 65. On the foreign policy front, the party is best known for its openly anti-NATO stance and its support for Nord Stream 2.

Main potential coalitions

With just a few days to go before the elections, polls suggest that there are six potential coalitions that could garner a majority in the Bundestag (where 300 seats are needed for a majority).

A so-called “Kenya” coalition of the Conservatives, the Social Democrats and the Greens would shift the balance of power towards the centre left of the political chessboard – something that would be hard for the Conservatives to swallow.

A “Germany” coalition of the Conservatives, the Social Democrats and the liberal FDP would likely result in more liberal policy and relegate the SPD to the role of junior partner. Given that the SPD is leading the polls, this is an outcome it is unlikely to accept.

A “traffic light” coalition between the SPD, the Greens and the FDP would probably yield a centre-left government tempered by the involvement of the Liberals. However, reconciling the partners’ differing demands would take arduous negotiations.

A “Jamaica” coalition of the Union parties, the Greens and the Liberals is also a realistic option, with the liberal CDU/CSU-FDP balanced by the reforming Greens. Reaching a viable coalition agreement would once again require tough talks.

While a “Left Union” coalition of the SPD, Die Linke and the Greens cannot be ruled out, it remains the least likely outcome according to the polls. The radical left’s potential partners are also wary of the grouping’s anti-NATO stance.

While renewing the current grand coalition of the SPD and CDU/CSU seems mathematically possible, in all likelihood it is something both parties will want to avoid. Each of the parties’ popularity has been dented by their time in the last two such governments, with voters complaining of too many compromises. It is thus plausible that both parties could turn towards new alliances rather than continue with more of the same.

Which combinations are most likely?

What kind of coalition government is emerging from the latest polling results? The two most likely combinations are a “Jamaica” or “traffic light” alliance. A “Jamaica” coalition could provide centre-right continuity and will become increasingly likely if the CDU/CSU Union ends up with the most seats on election night. This would squeeze out the SPD but could accommodate the demands of both the Greens and the FDP. Such a coalition would not completely upend Germany’s fiscal policy and would guarantee environmental targets were applied, backed by subsidies and/or tax incentives. However, the Greens could see their plans for higher domestic and European spending derailed. The other possibility, if the Social Democrats win the most seats on election night, is a centre-left government in the form of a “traffic light” coalition. This would translate into more flexible fiscal policy without jettisoning the debt brake, with the Liberals on board to keep an eye on the purse strings. However, the outcome of these elections looks set to be tighter than the polls are predicting. The ability to negotiate and rally the troops will be the decisive factor in the choice of Germany’s future Chancellor.

Philippe Vilas-Boas

 

To find out more, read our article Germany – Political renewal after Merkel?, published on 16 September 2021.