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Tight German election means more power for the EU

The inconclusive election will result in a coalition government. It will be greener and more pro-Europe than the one it replaces, and it is likely to spend and borrow more.

| 5 min read

There are three possible political coalitions for Germany following last weekend’s tight election. There could be a ‘traffic light’ coalition where the resurgent SPD teams up with the Greens and Free Democrats. There could be a ‘Jamaica’ coalition where the incumbent controlling party, the CDU, agrees with the Greens and the Free democrats. Or there could be a ‘Grand’ coalition where the SPD and CDU continue in government together. Other variants entail adding an additional party to the Grand Coalition, but this is not needed as the CDU and SPD between them have 402 seats and 368 is needed for a majority.

The FDP and the Greens have said they will talk to each other first. If they reach some agreement, then the pair of them can enter talks with both the SPD and the CDU to see which makes the best offer. Between them, the Greens and FDP have 210 seats, more than the SPD with 206 or the CDU with 196. Getting agreement between high spending anti-big business Greens and pro-business prudent financiers the FDP is not going to be easy, but both of these parties will want some power and will understand they are stronger together, hence the talks.

Both the SPD and the CDU are desperate to control the Chancellorship, so they will be willing to bend quite a long way to secure it. SPD leader Olaf Scholz is still in the stronger position to emerge as Chancellor as he can insist on this if they need a Grand Coalition and has a more than equal chance of doing a deal with the FDP/Greens as the CDU. He has the moral advantage that he came first in the polls and added seats and voting support to the party’s result in 2017, whereas Armin Laschet lost seats and votes on a large scale. He is closer to the Greens, the larger of the two other parties.

The FDP may find it difficult to make all the compromises they would be expected to make to enter the traffic light coalition. They would be heavily outnumbered on trying to control public spending, limit borrowing and turning a friendlier face to business by the Greens and SPD. They would prefer to enter a coalition led by the CDU. The Greens would dislike the CDU intensely. Armin Laschet is connected to decisions opening new opencast coal workings which have become an important election argument, and is not as strong on saving the planet as the Greens will require. Maybe Olaf Scholz, desperate to enter the Chancellorship and not keen on a grand coalition might provide reassurances to the FDP about spending and borrowing, and maybe he would seek to seal the deal by offering the FDP leader the job of Finance Minister. There is the possibility of doing more green capital investment plans off balance sheet and through the EU to reassure the Greens.

Armin Laschet is not keen on a Grand coalition again as that would probably mean accepting his SPD rival as Chancellor. He will need to find new green enthusiasms to try to woo the FDP/Green support he needs for the Jamaica coalition. We cannot rule out both Scholz and Laschet being turned down by one or other of the third and fourth-placed parties and being forced into accepting a new version of the Grand coalition.

It is too difficult at this stage to forecast which of these permutations will emerge. Meanwhile, our conclusions before the election stand true. The next government will be a coalition. It will be greener and more pro-Europe than the government it replaces. It is likely to spend and borrow more. The presence of a stronger FDP will seek to limit free spending and excess borrowing and that may become one of the main arguments in coalition talks. Both Scholz and Laschet will be happy to mouth reassurances about budgets and prudence, but both will doubtless also show flexibility in practice at both the German and EU level should they get into office.

The inconclusive election means more power for the EU, with more policies and plans likely to be settled in Brussels. The German Eurosceptics only commanded 10% of the vote and will be ruled out from anything other than opposition. German policy will be shaped by the EU’s long road to net zero, by the need to show more solidarity in budgets between rich and poor states, and by the requirement to stimulate more inflation and growth in the south of the Eurozone.

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Tight German election means more power for the EU

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