September 27, 2021

Europe

GERMANY: Scholz is the election winner, but the proof is in the coalition talks

BY Carsten Nickel

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( 3 mins)

As counting continues after the Bundestag elections, the race between the two main parties remains close. Both the Social Democrats (SPD) of Finance Minister of Olaf Scholz and Armin Laschet’s Christian Union (CDU/CSU) could each form a government with the Greens and the center-right Liberals (FDP). Overall momentum is with Scholz and the SPD, but the key question will be who manages to strike a deal among divergent partners to form Germany’s first three-way coalition since the 1950s.

As previously discussed, government formation could take some time. A failure of negotiations should not be ruled out until the very end of the process, in light of respective developments four years ago. The situation is complicated by the fact that no formal rules or deadlines exist for the order in which talks will have to be led. For instance, the leaders of the Greens and FDP have indicated tonight that they might lead two-way talks first to determine with which of the two larger parties they would enter into negotiations afterwards – an unprecedented proposal.

If the current projections prove to be correct, Scholz will hope that the momentum for his party will pave the way for him to the chancellery. The SPD seems slightly ahead of CDU/CSU, with gains of around 5 percentage points over 2017. This makes the SPD tonight’s winner, with gains also in direct voter transfers from CDU/CSU. According to polls, a majority of voters also seems to prefer an SPD-led government.

In contrast, Armin Laschet’s CDU/CSU experienced major losses of around 8 percentage points as Angela Merkel’s 16 years the chancellery is drawing to a close. This is the weakest result in the history of CDU/CSU since 1949. However, the continued possibility of a CDU/CSU-led government seems to protect Laschet – for now – from an internal backlash against his leadership.

Looking ahead at the coming days, reputational issues could be important. The smaller parties – the Greens and the FDP, both with gains in the elections – might not want to be seen as siding with CDU/CSU, a party that has incurred major losses after 16 years in government. The challenge, however, will be that both smaller parties are looking in opposite directions programmatically. While the Greens have indicated a preference for the-so called traffic lights coalition with the SPD, the FDP keeps reiterating its preference for a “Jamaica” coalition with CDU/CSU.

Government formation could take time, not least because the parties involved might have to consult with their leadership boards and perhaps also with their members during the process. Meanwhile, the election result as it is emerging from the projections tonight points to an electorate that prioritizes centrist balance and pragmatic consensus. Major projects such as the green and digital transformation will feature prominently in the coming years. But as highlighted in the past, great expectations about a government that spends big and expedites European integration might turn out to have been overdone.

With the FDP aiming for the finance ministry, fiscal moderation may well remain central in Berlin over the coming years. Olaf Scholz may have narrowly won this election, but after having run as a bone-dry pragmatist. If he becomes chancellor, he will have every incentive to govern in the same way.

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