Who will be the next Chancellor?
The German general election on 26 September will mark the end of Merkel's Chancellorship after 16 years and the race for her successor remains wide open. The polls show the greatest support for the SPD’s Olaf Scholz. The popularity of Scholz, who is Vice-Chancellor and Finance Minister in the incumbent CDU/CSU-SPD coalition government, has soared since Germany was hit by heavy flooding in mid-July.
In contrast, the CDU/CSU’s candidate Armin Laschet, the incumbent President of North Rhine-Westphalia, was criticised for some inappropriate behaviour at a memorial for flood victims and for the slow pace of his government in North Rhine-Westphalia in distributing financial support to those affected by the floods. The Green’s candidate Annalena Baerbock has failed to capitalise on an event that demonstrates the urgency of the fight against climate change and has also been penalised for not having government experience.
Which government coalition?
According to German Basic Law, the Chancellor is elected by the Bundestag, Germany's lower house, on the advice of the Federal President of the Republic. Members of the Bundestag are elected according to a proportional representation system with a 5% barrier. If no party obtains an absolute majority of seats, the party with the greatest support is asked to consult with the other parties to form a coalition government. However, other coalitions that would exclude the party with the most seats in the Bundestag are also possible.
The latest polls suggest that:
- no party will win an absolute majority in the Bundestag hence the next government will most likely be supported by a coalition;
- the centre-left SPD is leading and its momentum has been rising since the floods that hit Germany around mid-July;
- the support for Merkel’s centre-right CDU/CSU has tumbled to an historical low;
- the Green party has lost support since the spring and now trails the other two major parties;
- support for the other parties that will likely enter the Bundestag has stabilised at 12% for the liberals of the FDP, at 11% for the far-right AfD, and at 7% for the leftist Die Linke.
If the election result is in line with the polls, for the first time in the post-war period the government coalition could include three parties. In theory, this opens up numerous alternative formations, but only a few of them are viable because all of the four largest parties have effectively ruled out governing with either the AfD or Die Linke. The good news for markets is that the coalition including the SPD, the Greens, and the FDP, seems by far the most likely.
What will be the priorities of the next government?
Agreement among the SPD, the Greens, and the FDP can be found on greater public investment in environmental policies, innovation and the improvement of infrastructure. At the same time, the presence of the FDP in government would be welcomed by the markets as a guarantee against a generalised increase in taxation and regulation, including of the labour and housing markets.
It might be more complicated to find a common denominator in the approach to the European Union. The SPD and the Greens favour greater European integration, including an increase in the EU budget and the development of fiscal solidarity instruments. In contrast, the FDP has historically held rigid positions on burden sharing within the EU and respect of fiscal sustainability criteria.
Download the full edition of our Infocus publication here.