Germany’s watershed election

This is the English edition of the Europe Express weekend newsletter. You can find a German-language version here.

Welcome back — herzlich Willkommen zurück!

Three trends, each a source of grave concern for Germans, form the backdrop to Sunday’s Bundestag elections: an uncertain, even threatening international outlook; a tense, divided domestic political scene; and an economy that, while strong in many respects, is stuck in the doldrums.

Whichever parties form the next government — my hunch is that Friedrich Merz’s Christian Democrats will govern in a coalition with either or both of Olaf Scholz’s Social Democrats and the Greens — the tasks ahead will be formidable. I’m at tony.barber@ft.com.

The return of history

This week, I found myself reflecting on the Germany I knew around the time of the fall of the Berlin Wall, reunification and the final years in power of Helmut Kohl, the late CDU leader who held the chancellorship from 1982 to 1998.

In August 1990, Kohl delivered a speech to the Bundestag to celebrate the unification of west and east that took place two months later. It makes poignant reading (here in German) today.

In his speech, Kohl paid special tribute to “our American friends”, who had ensured the Federal Republic’s security during the cold war and then assisted reunification. He also thanked the Soviet leader Mikhail Gorbachev, without whose reformist policies the dramatic changes of 1989-1990 in Germany, and in central and eastern Europe, would surely not have happened.

Later in the 1990s, Kohl often made the point that, for the first time since Germany had become a united nation-state in 1871, it was now “surrounded only by friends and partners”.

American disdain

Germany’s European neighbours are still friends and partners, even if political trends in France, Austria and parts of central and eastern Europe give rise to concern in Berlin. But far more worrying is the antagonism of Vladimir Putin’s Russia and, above all, of the US under the Trump administration.

US vice-president JD Vance, Elon Musk and other Trump associates in Washington treat Germany with open disdain. They express support for Alternative for Germany (AfD), the far-right party that rails against the liberal democracy constructed in western Germany after 1945 with indispensable US support.

On Tuesday, former Italian premier Enrico Letta observed:

“Of all the negative things coming from Trump, Musk and Vance, Musk endorsing the AfD was the worst.”

The AfD’s normalisation

To judge from the latest opinion polls, it doesn’t seem as if the Trump administration’s pro-AfD leanings and contempt for moderate parties have had much effect.

Polls continue to show the CDU with a substantial lead, at about 30 per cent of the vote, and the AfD in second place but making little headway beyond 20 per cent.

Even so, that would be the AfD’s best result by far in a Bundestag election. Moreover, the party stands out on Germany’s electoral landscape because of its strength in the nation’s five eastern Länder, as the YouGov map below shows:

Compared with the Bundestag elections of 2017 and 2021, one notable feature of this campaign has been the way the AfD and Alice Weidel, its chancellor candidate (profiled here in the FT), have come to seem a normal part of the political scene.

In a televised debate last Sunday, Merz, Scholz and Greens candidate Robert Habeck all turned their fire on Weidel. They challenged her about her party’s pro-Russian leanings and its extremism (a German court last year said the domestic intelligence agency was justified in designating the AfD a suspected extreme rightwing organisation).

Weidel didn’t come out well from these exchanges — but will that matter on Sunday? Marina Kormbaki, writing (here in German) for Der Spiegel magazine, captured an important aspect of the debate:

“The very fact that Weidel appears on prime time with the candidates who have the most promising chances of becoming chancellor, debates with them and shakes hands with them all at the end, sends the impression that the AfD belongs there and is a party just like the others.”

A splintered party landscape

We should put the AfD’s growth in context. It is part of a broader picture of an increasingly splintered party landscape in Germany.

In 2021, the CDU fell to its lowest share of the vote, 24.1 per cent, since the Federal Republic’s creation in 1949. This time, it is the SPD — currently polling at about 16 per cent — that is on course for its worst ever result.

For decades, these two parties and the liberal Free Democrats dominated the scene, making for an exceptionally stable political system, even after the arrival of the Greens in the 1980s. It is since reunification that the picture has really changed.

First came the radical leftist Die Linke, then the AfD. Finally, last year saw the emergence of the Sahra Wagenknecht Alliance (BSW), which combines left-leaning economic ideas with a rightwing emphasis on national identity, culture and hostility to immigration. This last issue has become a major election theme after three violent incidents involving migrants in Germany.

Eastern influences

The AfD, Die Linke and BSW have strong roots in the eastern Länder, illustrating (as I suggested in this newsletter in November) that, 35 years on, the political, social and economic impact of reunification continues to shape Germany’s party system.

We don’t know for sure if all seven parties mentioned above will pass the 5 per cent of the vote threshold needed to gain Bundestag seats. Writing for the Swedish Institute for European Policy Studies, Valentin Kreilinger says:

“Public opinion is volatile. What is clear, however, is that it will be a difficult task to build a stable government in a fragmented party system after a polarised election campaign.”

If all seven parties do secure seats, the next government could discover that Germany’s political fragmentation will make it extremely complicated to adopt one much-needed economic reform in particular.

This is the abandonment of the constitutionally enshrined “debt brake”, which specialists such as Shahin Vallée see as a priority to get Germany’s economy moving again.

Stuck in the parking lot

Before I turn to the debt brake, a few words on the overall condition of the German economy. In the past couple of years, hard-hitting commentaries have become commonplace. Andreas Rees, chief German economist at UniCredit bank, observes:

“The recent malaise is exemplified by the auto industry, Germany’s flagship sector. Hit by a mix of technological change, weak demand and fierce competition from China, German car producers have switched from the passing lane to the parking lot.”

Likewise, in this analysis for the Finnish Institute of International Affairs, Marco Siddi, Tuomas Iso-Markku, Manuel Müller and Niklas Helwig make some trenchant points:

“Domestically, two decades of under-investment in public infrastructure, such as the railway network and educational institutions, as well as slow progress in digitalisation, are weighing on the country’s current situation. Limited innovation capacity and sluggish productivity growth also play a role.”

However, there’s a risk of painting the picture too black. In this extended commentary, my FT colleague Tej Parikh explains that, while the car industry and other traditional areas of manufacturing strength are in trouble, “German industry is well-placed for value creation, being highly competitive in a number of growth sectors”.  

Reforming the ‘debt brake’

That said, the debt brake needs to go. Passed as a constitutional amendment in 2009 in an effort to show Germany’s insistence on fiscal prudence during the western world’s banking sector and public debt emergency, it limits the federal government’s structural deficit to 0.35 per cent of GDP in normal times.

It is one reason why, as Timo Wollmershäuser, an economist at Munich’s Ifo institute, says:

“Germany is experiencing the longest stagnation of its postwar history by far.”

The difficulty will lie in the politics — specifically, the composition of the next Bundestag. To revise or abandon the debt brake will require a two-thirds majority in the legislature.

As Andrzej Szczepaniak and his colleagues at Nomura bank explain:

“The ability to get any reform over the line will largely depend on the extent to which smaller parties qualify, and thus enter parliament, and the extent to which we see CDU/CSU dissenters.”

In this respect, it’s noteworthy that, in contrast to the SPD and Greens, Merz has held back from making an explicit commitment to getting rid of the debt brake.

I am not alone in worrying that the task of increasing expenditure on defence, infrastructure and other areas of the economy could run into delays because of Sunday’s election result.

More on this topic

The AfD has strong roots in Germany’s eastern states but it is also attracting more support in the west, in a national context marked by severe political and economic polarisation, Valérie Dubslaff writes for the French Institute of International Relations

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