Germany's presumptive next chancellor wants his government in place before Easter. That gives Friedrich Merz, whose Christian Democrats (CDU) scored a clear but weak first place in February's general election, roughly six weeks to bring his Social Democrat (SPD) rivals on board.
The previous two governments needed about that long to come together.
A coalition between the conservative CDU/CSU parliamentary bloc and the SPD, whose third-place result put an end to Olaf Scholz's short-lived tenure as chancellor, is the only possible two-party coalition that excludes the far-right Alternative for Germany (AfD).
While the AfD had the best showing of any far-right party in Germany since the Nazis, coming in second, the CDU/CSU has pledged to maintain the so-called brandmauer — the "firewall” that keeps the far-right out of government. The conservative group has, however, worked with the AfD in the Bundestag, the German parliament.
Germany is no stranger to a "grand” coalition between the Union alliance and SPD, with the latter serving as the junior partner. Three of the last five governments had that makeup, but a fourth would be different in key ways: Neither side is the big-tent party it once was, polling at historic lows; and both have shifted considerably to the right on major issues.
Merz has warned that without significant reforms of economic, migration and domestic security policy, the AfD could triumph in the next election, currently scheduled for 2029.
“There is a sense that mainstream politics hasn’t delivered for eastern Germany specifically,” Dirk Rochtus, a professor of international politics and German history at Belgium's Catholic University of Louvain, told The Parliament.
Cuts to social spending
Nearly one in three voters in former East Germany cast a ballot for the AfD. The party of Alice Weidel has capitalised on voter frustration, an issue particularly acute in the east, and fueled a sense of insecurity and loss of control.
The east-west divide is partly due to the lingering legacy of how then West Germany absorbed erstwhile East Germany at the end of the Cold War. Factories closed, companies from the West took over and brain-drain ensued.
“There is a feeling of being neglected or being looked down upon in the east,” Katja Hoyer, a historian and visiting research fellow at King’s College London, told The Parliament.
Foreigners arriving from elsewhere in Europe, and then beyond, became an easy target of resentment. A spate of isolated but high-profile knife and car attacks, sometimes carried out by non-Germans, have added to the combustible political landscape.
“People in East Germany lived in an almost homogenous German-only area basically up until 1990,” Hoyer said. "The change is more visible than in the west.”
Regardless of the lack of connection between migration and crime, Merz is promising hardline policies on migration and domestic security, which he hopes will ward off further rise of the AfD.
His plans include permanent border controls, which could violate the open-border Schengen Agreement that Germany is part of, as well as hastening the rejection or deportation of asylum seekers. Those measures, depending on how they are crafted, could also violate European and international law.
Social welfare also topped voters’ major concerns, according to polls. The CDU has consistently pushed for a more work-focused welfare system, emphasising stricter welfare eligibility criteria and potential reductions in benefits over time. Merz has also suggested reduced social benefits to non-citizens, another AfD talking point that would likely face legal challenges.
Tax cuts and deregulation aimed at stimulating growth constitute a “very pro-business and economic policy,” Armin Steinbach, a professor in EU law and economics at HEC Paris, told The Parliament. “Financing it by growth is not realistic.”
Doubling down on defence
During the campaign, Merz proposed cutting €100 billion from migration and social services, along with suspending family reunification for refugees with subsidiary protection. Labour unions and civil society groups are already gearing up for a fight, warning that rolling back benefits could deepen social inequality.
“The SPD will never agree to cut down on social expenditure, extend the working age or a reduction of pensioners income,” Steinbach said.
Both parties broadly agree on strengthening the armed forces. A stalwart Atlanticist, coming to politics from the world of global finance, Merz wants to increase defence spending.
Germany has struggled to keep to NATO's spending guideline of 2% of GDP. The off-budget "special fund” of €100 billion, approved in response to Russia's full-scale invasion of Ukraine in 2022, is almost depleted. Merz, a fiscal conservative, is queasy about public borrowing or raising taxes, leaving discussions open as to where more money for the military can come from.
Given Germany's strict debt rules, which limit borrowing to just 0.35% of GDP, lawmakers have limited financial firepower. Loosening the rules would require a change to Germany's pseudo-constitutional Basic Law, for which a grand coalition is unlikely to have the votes.
The government could, however, declare an “exceptional emergency” to bypass the debt rules with a simple majority. This is how the "special fund” got raised, as well as how the previous government kept Germany afloat during the COVID-19 pandemic.
Policy contradictions
Merz's search for more money built on a stronger economy may run contrary to his anti-migrant impulses. With one of the oldest populations in Europe, Germany faces a shrinking workforce that threatens growth and strains public finances. The German business community has repeatedly warned that labour shortages, particularly in skilled industries, could stifle productivity and innovation.
Economists estimate that Germany needs 300,000 net migrants a year to deal with the demographic problem.
“With his very strong and assertive migration policy, Merz is shooting in his own knee,” Steinbach said.
The SPD's outgoing government passed citizenship reform and skilled worker legislation, making it easier for newcomers to naturalise and companies to attract foreign workers in essential sectors. At the same time, Scholz tried to play the law-and-order card by regularly boasting about his government's deportation efforts.
Merz has expressed an interest in relitigating some of those reforms. The length and difficulty of coalition negotiations may therefore depend on which SPD comes to the table: the more traditional centre-left one advocating for social protections and public spending, or the more hawkish one that aligns with its would-be partner on foreign, border and domestic security.
With the EU and NATO's European contingent facing an unpredictable partner across the Atlantic, the CDU and SPD are under pressure to reach an agreement and get a government going for the bloc's biggest member. To succeed, they would have to deliver something that past grand coalitions often lacked: change.
“Over the next four years, people want to see a government that does more than just manage the situation; they expect a true turning point,” Hoyer said. “Europe is watching closely.”
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