German Elections: Who might soon govern the country and what it would mean for the EU

On September 26, Germany is electing a new government. With the election day less than a month away, the race to replace Angela Merkel and – potentially – her Christian Democratic Union (CDU) has not been lacking in surprises.

In the fragmented contemporary German political landscape, it currently seems mathematically unlikely that a two-way alliance will be able to achieve an absolute majority in parliament. In case of a three-party government, however, inner-German consensus on international issues will no longer be a given. After all, the combinations on offer contain plenty of fuel for potential political conflict. In light of this, anticipating the possible outcomes of the German elections is essential for stakeholders looking to forecast any potential policy changes, both at the national and EU level. This report will assess the likelihood of different potential coalitions and discuss the possible implications each would have on EU policies.

1. Traffic Light coalition (SPD + Greens + FDP)

Why this coalition? Both the SPD and the Bündnis 90/Die Grünen (the Greens) have confirmed that they would be each other’s preferred coalition partners. And in fact, even if they are forced to bring in the liberal FDP, this might still be one of the overall more compatible alliances, at least when it comes to foreign policy. According to recent polls, this coalition would also have the largest support amongst voters.

Why might it not happen? On fiscal and economic matters, the liberal FDP is clashing with both the SPD and the Greens. If it were not for Scholz, a rather centrist Social Democrat, the SPD and the Greens would have a hard time even making Lindner and the FDP an offer they can accept. While the SPD and the Greens want more regulation and government intervention in order to tackle social and ecological issues, the FDP categorically opposes measures like European taxes.

Who would be the winners? A “Traffic Light” government would champion a strong European Union. There is a shared sentiment that renewed strategic focus should be put on promoting European autonomy in many areas of international relations, including European defense and technology. In addition, in the digital sphere, all three parties lean towards privacy, data protection and oppose general citizen surveillance, both online and offline. Compared to an R2G coalition, the influence of the liberal FDP might benefit entrepreneurs and proponents of a free market.

Who would be the losers? If this coalition alignment takes place, the FDP’s leader – Christian Lindner – has expressed his intention to become Finance Minister. This would likely entail the continuity of pro-austerity policies by the German executive, since the FDP defends a quick return to the Stability and Growth Pact rules – even impose tougher sanctions on member states that exceed their GDP/deficit limit – and advocates that the NextGenEu has to be one-off.  Additionlly, tensions with CEE Member States would likely increase, due to these parties’ strong focus on stronger supervision of the rule of law by the EU, as well as their very different views on climate, migration and family topics.

2. R2G coalition (SPD + Die Linke + Greens)

Why this coalition? Die Linke (The Left) continues to poll at approximately 7%, with little movement over the past several years. However, this is the margin the SPD and the Greens would need in order to form a coalition, without relying on the FDP and its distant ideology. The SPD’s lead in the polls continues to widen, while the CDU/CSU’s support dwindles. If this trend is sustained, the SPD will have a strong mandate to form the government of its choice.

Why might it not happen? Die Linke’s intention to leave NATO, oppose military intervention is a no-go for both the SPD and the Greens when forming a coalition. Further examples of disagreement between Die Linke and the SPD/Greens include foreign policy issues, such as Russia and the Transatlantic relationship. The SPD Chancellor candidate Olaf Scholz has declared that he will only head a government which supports the transatlantic alliance.

Who would be the winners? All three parties share the collective goal of social democratic policies. Fighting climate change, the coalition is probably going to set higher goals than the Commission, as the Greens want to be climate neutral within 20 years, Die Linke by 2035 and the SPD by 2045. They would also support some social projects, such as a European framework for a minimum wage. 

Although Scholz and the SPD’s economic policies are more moderate than Die Linke’s and the Greens’ proposals, the three parties foresee a reform of the Stability and Growth Pact to give more leeway to member states for increasing expenditure and preventing too much austerity. However, it would probably require higher consensus within German parties to reform Germany’s constitutional debt brake mechanism. Similarly, the three parties expressed their willingness to some extent to work towards the development of the EU into a genuine economic, fiscal and social union. 

Who would be the losers? With R2G, large tax increases could be a financial burden for corporations, as R2G might introduce a tax on digital firms or increase taxation on carbon. Though the SPD and the Greens are less skeptical than Die Linke when it comes to NATO and the military, an R2G-led Germany might be more tentative when it comes to participation in international military operations. 

Finally, an R2G government might lead to further tensions with Eastern European governments. For instance, all three parties in question have in the past criticized the CDU/CSU for taking too soft a stance on the governments of Victor Orbán and Andrzej Duda. In addition, the expected push towards more climate action and a more liberal refugee policy would likely not be welcomed in certain Eastern parts of the Union, either.

3. Jamaica coalition (CDU/CSU + Greens + FDP)

Why this coalition? Four years ago, after Germany’s last elections, negotiation for an alliance between the CDU/CSU, the Greens and the FDP took place without coming to any agreement. However, right now, this would be the only coalition in which the CDU-candidate Armin Laschet might become chancellor, which might be an incentive for the Christian Democrats to make attractive offers to the FDP and especially the Greens. Additionally, if the FDP does not want to join a three-way coalition with the SPD and the Greens, and if a leftist alliance (SPD, Greens, Die Linke) doesn’t come to an arrangement, Jamaica could get a second chance.

Why might it not happen? Instead of pairing up with two market liberal parties, the Greens would probably prefer arranging with the SPD. Especially with regard to environmental issues, the positions of the Greens and the FDP seem to be hard to unite. Additionally, on certain topics concerning individual privacy, such as online data protection or CCTV surveillance or biometrical recognition software, the CDU/CSU might risk getting its own policies blocked by the coalition partners.

Who would be the winners? Other frugal countries, as the CDU/CSU and the FDP would continue a rigid budgetary and export-oriented policy. The transatlantic partnership would be intensified, even though all of the parties would try to strengthen the strategic autonomy of the European Union, for example with a European Army. The FDP and the Greens even aim to increase the European capacity to act, by making all decisions by majority. When it comes to climate, the FDP and the CDU/CSU will probably have to create incentives for the Greens, in order to arrange a coalition. 

Who would be the losers? Again, Southern European countries would probably not be able to benefit from the Greens’ aim to implement a European Monetary Fund where joint European debt would be possible, as the CDU/CSU and the FDP vehemently oppose. The relations with Russia and China might become more complicated due to concerns of the FDP and the Greens. Similarly, the strong focus of the FDP and the Greens on rule of law matters would further strain relations with the governments of Poland and Hungary.

4. Grand coalition (SPD + CDU/CSU)

Why this coalition? If there is going to be a majority for a two-party-alliance, it will be this one. For twelve out of the 16 years Angela Merkel and her CDU have been leading Germany, they did so in coalition with the SPD. Even though this time the tables might turn and the Social Democrats could take the lead, a coalition of the two largest parties would still promise a less complicated and presumably more stable alternative to the various three-party-combinations.

Why might it not happen? According to the current polls, a Grand Coalition would simply not reach an absolute majority. In addition, if the SPD indeed wins the most seats, Olaf Scholz and his party would likely rather choose to govern with smaller parties than repeat a Grand Coalition out of pure mathematical necessity.

Who would be the winners? Both parties have taken a rather balanced stance on foreign politics in the past. When it comes to German and European relations with China or Russia, a Grand Coalition government would likely continue on the current path where other coalitions might pursue a “tougher” course in foreign relations.

Who would be the losers? Even if the CDU/CSU and the SPD end up with a majority, the fact that it was such a close call indicates that a large part of the German electorate is yearning for change in the political landscape. “More of the same” – though admittedly under a new lead – would come as a disappointment to these voters, especially if there are other options. Everyone hoping for a Germany that will take the lead when it comes to climate action and more market regulation, for instance, would probably rather see a coalition that does not involve the CDU/CSU.

5. Germany coalition (SPD + CDU/CSU + FDP)

Why this coalition? This could be an option in case it is not possible to form a coalition with the Greens and the current grand-coalition arrangement does not have the numbers to continue. It would be similar to the status quo, but the participation of the FDP would increase internal tension within the coalition, especially with the SPD.

Why might it not happen? If the SPD comes first, it would have few incentives in joining a coalition with two economically liberal parties, thus further disappointing its left-wing supporters. The FDP and the CDU/CSU would likely block the more ambitious social policy agenda of the SPD.

Who would be the winners? Other frugal countries, as they would probably stick to the European Stability and Growth Pact. The SPD might ease off the deficit rules, whereas the CDU/CSU and the FDP aim at reforming the SGP to increase penalties to rules’ infringement by member states. Also, firms would not have to expect strict regulation in regard to climate change or due diligence. Even though the FDP called on the current government to be more vocal about different human rights issues, German foreign policy would likely stay more or less the same.

Who would be the losers? Since both the CDU/CSU and the FDP are likely to continue budgetary rigidity, Southern European countries would not benefit from a “Germany” coalition. The CDU/CSU and the FDP have opposed the implementation of mechanisms such as the Recovery and Resilience Facility. Both parties also disapprove the SPD’s plans for a European Monetary Fund.

6. Kenya coalition (CDU/CSU + SPD + Greens)

Why this coalition? A Grand Coalition with an additional environmental touch: Both of the big parties have expressed that they would not mind governing with the Greens. For the SPD, Kenya might even be preferable to a Grand Coalition since their large thematic overlap with green topics would shift majority within the government even further to their favour. In addition, even with changing polls, this alliance should always have a majority by a large margin.

Why might it not happen? If R2G or a “Traffic Light” stand a chance, neither the SPD nor the Greens would voluntarily pursue a Kenya coalition with the CDU/CSU.

Who would be the winners? For some international partners, it might come as good news that, due to the Greens being the “junior partner” in this coalition of three, things would largely continue as they did in the years of Grand Coalition. Some concessions might need to be made when it comes to environmental topics and the SPD as the now largest party would probably push for some social policies close to their heart, but there likely would not be any dramatic changes to the German position.

Who would be the losers? Due to the three parties being so different, a successful coalition contract would have to water down many of the more ambitious goals on either side. For instance, it is unlikely that the Greens environmental goals would fully see the light of day. On the other hand, the CDU/CSU might have to soften some of its pro-(car)-industry positions and, for example, give in when it comes to regulating German arms exports. Experience from regional Kenya-coalitions in three German provinces shows that the alliance is prone to conflict – not the best precondition for a successful and stable government.

Current polls suggest that a Traffic Light or an R2G coalition will probably be most likely. Seeing that Olaf Scholz would become chancellor in four out of the five potential scenarios, much will be up to him. Considered to be a conservative SPD member and presenting himself as the legitimate heir to Angela Merkel, it would be very bold to expect Scholz to bring about an enormous change. Personally, he seems to feel more comfortable with a “Traffic Light” than pairing up with Die Linke. On the other hand, the SPD members must approve any coalition agreement, and many Social Democrats might prefer pairing up with the Greens and Die Linke to voting for an alliance with the market liberal FDP.

Ultimately, the SPD, as well as the other German parties, will have to face up to the facts in the weeks after September 26 – and negotiate the best packages on the bazaar of coalitions.

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