Continuity in all but Name

The aftermath of Germany’s elections

On 14 March, it will have been a whopping 172 days – the longest it’s ever taken to form a German government – since the German federal elections took place in September 2017. That day, Angela Merkel, a woman who has strongly influenced German and European politics since first becoming Chancellor in 2005, will be elected Chancellor once again by the German Bundestag.

While Germany has been economically successful under Merkel’s leadership, the poor showing of the Volksparteien (people’s parties) Christian Democratic Union (CDU) and Social Democratic Party (SPD) at the September elections highlighted a certain malaise within the German electorate about the direction the country has taken. In her speech at the recent CDU party conference, Merkel consequently blamed the poor results of the CDU on a loss of faith in the German government. This was mostly related to the poor management of the refugee crisis, further effects of globalisation, and a less stable international political environment.

To appease her critics, Merkel has therefore named several new faces to her cabinet. One of them is Jens Spahn, a fierce critic of Merkel’s refugee policy, who will become health minister. At the same time, the SPD, which has torn itself apart since achieving its lowest-ever election result, has nominated mainly familiar people to the cabinet. Among them is Olaf Scholz, a former government minister and Mayor of Hamburg, who will become Deputy Chancellor and finance minister.

Policy under the “grand coalition”

The broad lines of Merkel’s policy are unlikely to change, as another “grand coalition” represents continuity rather than change. However, Merkel’s probable exit from government in 2021 and growing populist tendencies mean that German politics may well get messier in the 2020s. For now, however, business leaders can rest assured that no dramatic change in German policy is in store and that they will continue to be able to do business in a stable political environment.

To understand what the new German government has planned for this legislative period, it is worth looking at the coalition agreement between CDU/CSU and the SPD. The comprehensive 177 pages long document outlines almost every aspect of German policy-making. Let us look at what is relevant for an international audience:

  • Europe: The coalition agreement is clear in its title. It wants to bring about “A new departure for Europe. New dynamics for Germany. More cohesion for our country.” In a clear nod to French President Emmanuel Macron’s call for European and Eurozone reforms, the coalition parties say that the renewal of the European Union will only succeed if Germany and France “work together with all their power to achieve this goal.” How far this commitment to the French plans will go, however, is less than certain. Just last week, Merkel and Macron agreed to postpone an announcement of Franco-German proposals for Eurozone reforms, apparently due to disagreements on how far Eurozone integration should go.


  • Digitalisation: With Germany seen as a laggard on digital policy in Europe, CDU/CSU and SPD now seem to kick-start the digital revolution in Germany. Particularly criticised in the past legislative period for having failed to promote the development of high-speed internet across Germany, the coalition agreement wants to introduce a “right to high-speed internet” by 2025. Moreover, the agreement indicates a departure from Germany’s “privacy first” attitude to digital policy with a call to “retain the freedom of innovation and digital business models”. Overall, the agreement indicates a German willingness to go beyond its privacy conscious outlook and unleash its digital industry, while more strictly regulating American digital champions such as Facebook, Google or Amazon.


  • Migration: One of the most contentious topics in Germany for the past few years, the refugee crisis also played a prominent role in the coalition negotiations. With a cap on refugees being a key demand of the CSU, the final coalition agreement talks about limiting refugee numbers to between 180.000 and 220.000 per year. At the same time, the right to asylum and the Geneva Convention on Refugees will remain untouched. How exactly these contradicting statements will work together remains to be seen but a tougher approach to the current situation is to be expected. German calls for a fairer distribution of refugees across the EU will continue to grow. A greater focus on EU border protection can also be expected. On the other hand, with regards to demographic change in Germany, the coalition agreement calls for a reform of immigration law for qualified workers to counter the shortage of skilled labour.


  • Environment: As is now certain, Germany will miss its 2020 climate targets. The parties therefore focus on developing a new action plan for 2030. The agreement foresees a gradual phase-out of coal-powered energy and increased funding for e-mobility infrastructure. Overall, the coalition parties do not show great ambitions with regards to environmental and climate policy, choosing to appease the important coal and automotive industry instead. Nevertheless, Germany will re-assess its “bioeconomy” strategy for 2030 and foster projects in this area to make the most innovative and sustainable use of renewables across different sectors.


  • Defence: Defence policy is marked by continuity, with defence minister Ursula von der Leyen being one of only two ministers keeping her previous post. The parties agree that they want to increase Bundeswehr funding and gradually increase defence spending in general, until the NATO two percent budget target is reached. However, defence budget increases should be coupled with equal increases in development aid. The troops, which in recent years have increasingly focused on crisis operations around the world, will be re-focused on national and allied defence. At the same time, the agreement calls for a European Defence Union with the end-goal of a European Army. 

The five areas above are only exemplary of the overarching, comprehensive coalition agreement. Internal politics, safety and security and labour laws are also certain to play an important role for the next government. More than that, it remains to be seen how well the new government will work together. While the parties have shown they can cooperate, their weak showings at the elections are certain to lay bare divisions and tensions between the two blocs. Most importantly perhaps, the government will need to slow down the emerging right-wing movement in the country. Will it be successful? We can only hope so.