What can the EU expect from the German federal election?

The future of many EU policies largely depends on the outcome of German election in September. Indeed, the potential end of the grand coalition, made up of the Christian Democratic Union and the Social Democrats, could alter the position of Berlin on issues such as the EU defence policy and the future of the Eurozone.

According to its supporters, the grand coalition brought harmony and balance to German politics. The two political parties in coalition usually offset one another views, each supporting different policies. With a different coalition, either right-wing or left-wing, this equilibrium would fall apart, providing the new government with a firmer stance on a range of issues.

A likely alternative is between Angela Merkel’s CDU, the Free Democratic Party (FDP), and the Greens. This coalition, which has only been tried at the regional state level, is about to be in power in Schleswig-Holstein after the recent election.

According to the polls, there might even be the possibility of a centre-right coalition between CDU and FDP. A CDU-led coalition without the Social Democrats would be keener on closer defence ties at EU level, such as the creation of a defence fund.

The fate of the common currency area is also at stake. A success of centre-right wing parties would likely slow down progress towards the reform of the Eurozone or the completion of the Banking Union. Both the CDU and the Liberals have been reluctant to support proactive measures enhancing financial solidarity between Eurozone members. Conversely, the involvement of the SPD in government would soften the position of Berlin and keep it closer to Paris.

That is perhaps the biggest question of this election: how will it affect Franco-German cooperation and its leadership of the EU? A right-wing coalition between parties with similar positions on economic and foreign policy (CDU/CSU and FDP) would strengthen the influence of Angela Merkel, allowing her to negotiate more easily with Emmanuel Macron. However, the French President would probably need to scale down its ambitions for the reform of the Eurozone if Social Democrats are not in government (for more information on the different scenarios on the future of Europe, check our previous report).

To understand these developments, looking at the actual positions of politicians is more important than ever. This report maps the votes cast by German Members of the European Parliament (MEPs), and not mere statement. Based on our voting data, we assess the policy outcomes of potential coalitions, and what the European Union can expect from the next government.

The consequences of the end of grand coalition

We have assessed five potential coalition scenarios, but only three of them (with CDU/CSU) are the most likely to happen, unless polls change dramatically in the run-up to the election.

Once again, the coalition which would get the largest majority in Bundestag is the grand coalition between the Christian Democrats (CDU and CSU) and the Social Democrats (SPD). In a grand coalition where the two parties carry a somewhat similar weight, no individual party can achieve the full adoption of its platform, leading to a balanced government which implements centre-right and centre-left measures at the same time.

The downside, however, is that such a coalition prevents controversial topics from getting properly addressed. According to the votes cast by German politicians in the EP, this grand coalition is more divided than other alternatives when it comes to issues, such as defence, trade policy, and the strengthening of the Eurozone.

This period of stability brought by the CDU/CSU-SPD coalition could end after the elections of September. The SPD will try to avoid a new grand coalition, as Schulz has been trying to re-politicise German society with a leftist platform. Coupled with this, there is the re-emergence of the Liberals. The Free Democratic Party (FDP), which currently polls around 9%, could reclaim its role as kingmaker, allowing Angela Merkel to run the country without the help of SPD.

This “black-yellow” coalition would have a more coherent position on issues like economic and monetary affairs, where the CDU agreed with the FDP more often than with the SPD. The new German government would lurch to the right, with a more homogeneous position on the Eurozone, free trade agreements and the EU defence. This center-right coalition could also polarise the debate about other issues like the environment and social policy.

matching rate - CDU - 3rd draft

Yet, it is too early to say whether this coalition would get a majority in Bundestag (316 seats). If not, the CDU would also need the support of another party, preferably the Greens. This situation, which has only happened once at the local level, would complicate coalition talks, considering the very different position of the left-leaning party on defence and economic affairs.

A left-wing coalition, comprising the SPD, the Green party, and potentially Die Linke, would also be more likely to take less moderate stances on a range of issues. A SPD-led government coalition, which has little chance to get a majority in Parliament in September, would be more sceptical of a common European Defence and would tend to soften relations with Russia. Conversely, it would call for strengthening the Eurozone, with a dedicated common budget.

Yet, things are not that easy. Even though some parts of Die Linke have become more moderate, the party still holds radical views that the SPD could not accept. One should note that the Social Democrats agreed in the EP much more often with CDU and FDP than with Die Linke and with the Greens. The most centre-leaning members of SPD would feel uncomfortable in an arrangement with the far-left and this can potentially lead to infightings within the Social Democrats. Moreover, as the recent state election in Saarland showed, the possibility of Die Linke joining the government can scare traditional SPD and centrist voters.

2 - Germany

VoteWatch Europe assessed the policy impact of the potential governing coalitions, with a particular focus on the governance of the Eurozone, trade and taxation policy, as well as foreign and defense policy. To do so, we looked at how German politicians voted when deciding EU policy.

The level of support for a certain proposal from a potential governing coalition is represented in terms of colors: from dark green (very supportive) to dark red (not supportive at all). This selection of colors is based on the average weighted positions of the parties taking part in the coalition (CDU position weighs more than FDP positions). The weightings are based on the current performance of the parties in the polls.

The future of the Eurozone: yes, but in which direction?

PJvw52 German elections {eurozone}[draft6][19June2017]

A CDU-led coalition government in Germany would be reluctant to embrace ambitious reforms of the Eurozone. Although German officials want, publicly, to accelerate reforms of the euro area, they have never been very supportive of more integration in this domain, especially when it comes to economic transfers between Eurozone Member States.

However, in the case of a grand-coalition between the CDU/CSU and SPD, the German government would be more willing to back Eurozone reforms. Indeed, there could be a majority (from SPD to moderate Christian Democrats), supporting, for instance, Macron’s plan for a common Eurozone budget to fund investments.

Yet it would not be easy to find a compromise. Recently, Minister of Finance Wolfgang Schäuble (CDU) and Foreign Minister Sigmar Gabriel (SPD) could not agree on a common response to the European Commission’s paper on the Economic and Monetary Union (EMU). The CDU/CSU is not united at all on this issue, and some conservative politicians strongly oppose the idea of sharing a budget with Southern Eurozone countries, as highlighted by one of our previous reports.

A coalition without the Social Democrats would change the overall German position on the Eurozone. Indeed, both CDU and FDP are sceptical on the need to set up a centralised eurozone budget. A “black-yellow” coalition would also be less divided when it comes to renegotiating government debt in most indebted countries.

According to our voting data, a center-right coalition is also  likely to take a tough negotiation position on the Banking Union: both FDP and CDU voted in favour of strict measures to limit the exposure of national banks to sovereign bonds. Only if Member States make progress on limiting bank exposure to risky assets (bonds included), then Berlin would support the implementation of the European Insurance Deposit Scheme (EIDS). With the EIDS, banks deposits within the EU up to €100,000 would be guaranteed by a European fund. Some countries, like Germany, see this plan as unfair pooling of risk and urge member states to clean up their struggling banks. The situation is still deadlocked. Recently, during a vote on EIDS in committee, two of the three CDU MEPs abstained (for more information on the political support for completing the banking union, check our previous article).

Yet a black-yellow coalition is still unlikely to get a strong majority in the Bundestag and the potential presence in government of the Green party would only make the government’s position more complex. On the contrary, the presence of Social Democrats in government would soften the position of Berlin on the banking union. 

Trade and tax policies: two different scenarios

 PJvw52 German elections {trade&tax}[draft6][19June2017]

A CDU-led coalition government would definitely be more supportive of free-trade agreements with non-EU states. The most cohesive coalition in this regard would be the black-yellow one, comprising only the CDU/CSU and the FDP. Indeed, if the SPD or the Green Party were in government, they would soften the pro-free trade position of the Christian Democrats (to check the positions of the MEPs from other countries: our assessment on trade).

Similarly, the CDU-FDP coalition would be the most supportive of investor-state dispute settlements, a mechanism which has been criticised for its perceived lack of legitimacy and transparency. Conversely, the presence of Social Democrats in government could increase cabinet’s opposition to new EU trade deals. It is true that Martin Schulz backed EU-Canada trade deal. Nonetheless, the SPD could be pressured to adopt more protectionist positions on trade agreements in the event of coalition talks with the Greens and Die Linke.

On tax harmonisation and fiscal supervision, a center-right coalition would be more reluctant to move things forward at the EU level. Angela Merkel’s political party voted against tax harmonisation propositions in the European Parliament, and did not fully endorse tax supervision. With the SPD supporting it, the cabinet would be split over tax harmonisation in the event of a grand coalition. If the Social Democrats were to lead the government, a coalition of interests could emerge in favour of tax supervision and harmonisation at EU level.

Foreign affairs: centre-right coalition to be more hawkish on Russia and common defense

PJvw52 German elections {defence&foreign}[draft6][19June2017]

Stars are aligned for building a EU’s common defence policy with the UK’s withdrawal from the EU, the election of Donald Trump in the United States and the one of Emmanuel Macron in France. The German government, along with France, has called for stronger military cooperation between EU member states. After attending a NATO summit where President Trump has remained sceptic about the alliance’s mutual defence, Chancellor Merkel stressed the need for the Europeans to take more responsibility for their security.

Nothing is done yet. The outcome of the German federal election will have an impact on European defence policy. A center-right government, comprising the Christian Democrats and Liberals, will very probably accelerate the setting up of EU military headquarters, a joint defence fund, and even dream of an European army. This coalition would be the most cohesive one on these issues. If the Greens were to be in government with these two parties, they would struggle the influence the overall position of the government, considering that the weight of the environmental party would be relatively small compared to the others.

Yet things could become more complicated for EU defence in the event of a victory for Martin Schulz’s party – or, more likely, if Angela Merkel has to lead again a grand coalition. In this case, the position of Berlin would be more balanced, the SPD opposing too ambitious measures for the establishment of a joint European defence and security policy.

Even though the former European Parliament President has called for an anti-terrorist center at the EU level and has taken a harder line on domestic security, his positions on defence spending are more nuanced: he has, for instance, repeated that, if elected chancellor, Germany will not meet Trump’s demands to increase military spending to 2 percent of GDP.

In the event of a left-wing government, made up of the SPD, Greens and Die Linke, Berlin would take very different positions from other EU member states. This “R2G” coalition (red-red-green) would include Russia-friendly politicians (in both the SPD and Die Linke), who are opposed to EU economic sanctions over Ukraine crisis. Similarly, with Die Linke in government, Berlin would be likely to be more hostile towards NATO.

An election shaped by international developments

In addition to domestic political dynamics, a set of European and international issues has a chance to impact the September German election. Greek debt talks at Eurogroup is one of these. German officials, and especially Finance Minister, Wolfgang Schäuble, continue to oppose debt relief for Greece, asking Athens to implement further economic reforms.

Germany, one of the most important Greek creditors, will never take the risk to soften its position on debt relief before September. Domestically, if this issue is debated this summer by more intransigent parties (FDP and far-right AfD), Angela Merkel will have to clarify her position in order not to lose votes. One thing is certain: this problem, as well as the delicate situation of the Italian banks, will need to be addressed and debated in Germany, sooner or later.

The refugee crisis can also become a hot potato for Angela Merkel. Her “open-door” policy toward refugees has been often criticised by her rivals, especially the Liberals and far-right AfD. Even though her policy has been restricted since then, the refugee issue might reoccur in EU and German politics this summer, putting Merkel under pressure. Another concern for her is the EU’s refugee deal with Turkey, at a time of political turmoil between the two partners.

Relations have recently deteriorated between Turkey and Germany. Ankara just refused German lawmakers’ ability to visit troops at Incirlik, an air base in Southern Turkey. If tensions between the two countries continue to escalate, this could affect Angela Merkel’s image at home and abroad. All these developments, as well as the transatlantic relationship, need to be followed to track the direction of the German election.

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For detailed mapping of EU Parliamentarians’ and governments’ actual positions (based on actions undertaken in the EU decision-making process, not mere statements), impact analysis of Brexit, national elections or other events on EU policies contact us at [email protected].

About us: VoteWatch Europe is the think tank most followed by the Members of the European Parliament, according to an independent study. Our reports are also quoted frequently by European and international institutions and the world-wide media.

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