Political Situation:
We had the biggest voters turnout for the past 40 years as high as 82.5%, meaning more than 59.2 million Germans participated in the elections.
Friedrich Merz led the conservative CDU and won the elections without though breaking the barrier of 30% and needs now to form a coalition in order to form government. The Social Democratic Party (SPD) of outgoing Chancellor Olaf Sholz had its worst performance with 16.4%, the lowest in decades. Sholze’s coalition faced challenges in addressing domestic issues such as climate policy, immigration, and energy transitions. The far right party AFD was one of the winners of the elections since it has double its power in four years to 20.8% and has become the second largest party in parliament.
Challenges in Leadership: Chancellor Olaf Scholz has faced scrutiny and criticism regarding his leadership style and the effectiveness of the coalition in addressing pressing issues. Internal disagreements among coalition partners have sometimes stymied progress on policy implementation. Friedrich Merz is called to form a coalition and addressing the issues that Sholz government failed to overcome and additionally work with EU partners to a more unified entity in terms of Defense, Foreign Policy and Financial Markets.
Foreign Policy Dynamics: Germany plays a crucial role in EU foreign policy, especially regarding relations with Russia and China. The ongoing conflict in Ukraine has prompted Germany to take a stronger stance in supporting Ukraine and seeking alternatives to Russian energy supplies. Merz new government is expected to work with its partners in achieving a fair and viable agreement in order to end the war with Russia and safeguard the security of the country.
Rise of Populism: There are increasing concerns about the rise of populist parties, such as the Alternative for Germany (AfD), which may influence German politics and, by extension, EU policymaking. Merz already announced that his coalition government will exclude the AfD but the rising power of the far right will pose challenges to his new government and especially immigration policies.
Economic Situation:
Economic Performance: Germany’s economy has faced headwinds due to high inflation rates, energy supply challenges resulting from the Ukraine conflict, and a reliance on Russian gas prior to the conflict. While Germany has historically been Europe’s economic powerhouse, there are signs of slowdown and recession pressures.
Energy Transition: Following the need to reduce dependence on Russian energy, Germany is accelerating its transition to renewable energy sources. This shift is not only critical for energy security but also plays an essential role in EU climate commitments.
Manufacturing and Exports: Germany’s manufacturing sector is vital for its economy, but it’s been affected by global supply chain disruptions and decreasing global demand. This situation could influence trade dynamics within the EU and beyond. Another challenge are the expected tariffs that the new USA government has announced that it will impose to foreign imports including the EU. If that takes place then the export sector of Germany will undoubtedly be affected.
Impact on the EU:
Economic Stability: As the largest economy in Europe, Germany’s economic health is critical for the stability of the Eurozone. A downturn in Germany can have ripple effects across the EU, impacting trade, investment, and economic growth in other member states.
Policy Leadership: Germany’s leadership on issues such as climate change, immigration, and economic policy is essential for EU cohesion. Internal political challenges in Germany can lead to hesitancy or delays in broader EU initiatives.
Geopolitical Influence: Germany’s stance on foreign policy issues directly impacts EU relations with outside powers. Its proactive approach to supporting Ukraine and aligning with NATO partners is crucial for European security policy.
Financial Contributions: Germany plays a significant role in the EU budget, and its economic outlook will influence discussions on EU funding, especially regarding recovery packages and development aid to member states.
In summary, Germany’s current political and economic situation is pivotal to the future of the EU, affecting everything from economic stability and policy leadership to geopolitical dynamics. The responses to these challenges will shape not just Germany’s future, but also the broader trajectory of the EU.
