Germany will vote on Sunday and the stakes could not be greater. Europe’s biggest economy, which is struggling to cope with low growth, rising energy prices, and declining industrial dominance, has been stuck in neutral.
Last year the coalition “traffic lights” of Social Democrats, Greens and Free Democrats collapsed, so it was up to the voters who would have the chance at turning the tide.
According to polls, the CDU conservative, headed by Friedrich Merz will be the leader. Voters are concerned about a rise in the AfD’s popularity, boosted by Elon Musk.
It will be the responsibility of whoever wins to revive an economy which is no longer as powerful as it was. So far, Germany’s future is not looking good.
Germany’s economic state
Germany’s economic state
Germany’s recovery from the pandemic just didn’t happen. The economy shrank twice since 2023.
This is the first time since early 2000s that we have seen a back-to-back decline. According to the International Monetary Fund, growth is expected at just 0.3% this year.
This is a sign that something has gone wrong in an economy which once led the way for Europe.
The most apparent problem is the cost of energy. Germany switched to US-sourced LNG and Qatari Liquefied Natural Gas (LNG), after Russia stopped gas supply in 2022.
The cost was high, but it worked. German manufacturers pay now twice as much as their US counterparts for energy.
Steel, glass, chemicals and other industries are reducing production or relocating overseas. Porsche has announced the loss of 1,900 jobs, while smaller manufacturers are closing their doors.
The crisis is not caused by energy. Germany’s main industrial sectors, including machinery, automobiles, chemicals and cars, are facing more competition from China than ever before.
China, once a trusted customer, now produces its own high tech products, from industrial equipment to electric vehicles. German exports have shrunk, and “Made in Germany’s” old advantage has faded.
Will the next government be able to turn things around in the country?
Will the next government be able to turn things around in the country?
Whoever the winner is on Sunday, they will have to make tough decisions. CDU polling at around 30% promises deregulation and tax cuts.
Merz speaks of “unleashing” the economy by reducing red tape, making factories and powerlines easier to build.
The playbook is familiar, but there’s no indication of how the plan will address deeper issues like shortages in workforce and digital infrastructure.
Both the SPD and Greens who are trailing behind at 16-17% and 12-14% respectively, support more public investments.
To encourage more women to enter the workforce, they want to increase renewable energy, improve rail networks and enhance childcare.
The “debt-brake” in Germany, a constitutional provision that caps government borrowing limits the amount they can spend.
Arguments over the loosening of this rule led to a split in the last coalition. Merz already stated that he will not budge.
AfD, which has been gaining in popularity and is now polling around 20%, presents a nationalist vision of economics: stop Germany’s “green transition”, lower energy costs through reviving nuclear and coal, and reduce immigration.
They are heard in industrial areas that struggle. But economists are warning that their policies may isolate Germany from EU and global markets, which is the lifeline keeping its economy afloat.
The mainstream parties including CDU, SPD and Greens have all categorically rejected any possible coalition with AfD.
Even a powerful AfD performance is unlikely to lead to real power in this political climate.
For now, at least. Who knows what the public’s reaction will be in four years if the new government does not make meaningful changes.
Does Elon Musk influence the German elections?
Does Elon Musk influence the German elections?
Elon Musk’s unexpected embrace of AfD injected unanticipated volatility.
His interaction with Naomi Seibt began with her being dubbed the “anti Greta Thunberg” by Germans.
Musk began to praise the AfD and called it “the only party” that could “save Germany.”
Even Alice Weidel, the AfD’s leader was interviewed on X. He also appeared virtually in an AfD rally.
The AfD’s message is amplified far beyond Germany.
Musk’s tweets and retweets pushed Weidel X’s following beyond 985,000. Rival politicians were dwarfed.
While the AfD has seen a massive increase in its online presence, it is less certain whether that will translate to more votes.
Many voters still view Musk’s comments with suspicion, as they are viewed by the traditional German media.
Trump’s actions make things worse for Germany
Trump’s actions make things worse for Germany
Donald Trump’s return as president has reignited fears about trade, just as Germany is struggling with domestic problems.
The Germans are already imposing 25% tariffs for steel, aluminum and cars.
Germany exports 10% of all its exports to the US.
Tariffs will hurt Germany’s automakers who already lose market share to Chinese brands such as BYD and Tesla.
Volkswagen, BMW and other German automakers produce their cars in Mexico already to avoid tariffs. Trump also levied duties on Mexican imports.
German central banks warns that the recession could worsen if tariffs are raised to 10%.
the uncomfortable truth
the uncomfortable truth
A majority will not be won by any party. Coalition talks will be led by the CDU, possibly with SPD or Greens.
Merz promised that a new government would be formed by Easter. However, if the negotiations drag out, which they usually do, Germany may face months of political gridlock.
Forming a new government is only the beginning. Germany risks a long-term economic decline if it does not take decisive actions on the energy cost, shortages of workers, and competitiveness in industry.
In the political debate, there have been few hard questions asked about funding infrastructure improvements, attracting skilled immigrants or accelerating industrial innovation.
The uncomfortable truth is that no party can offer a credible solution to Germany’s economic problems.
CDU’s promise of deregulation does not address energy prices.
Both the SPD and Greens promote investment, but do not explain how debt can be avoided.
The AfD is quick to blame migrants, while neglecting Germany’s ageing population and declining industrial competitiveness.
No matter who is in charge of the German chancellor’s office, Germany’s economy will still be on a downward spiral if the next government does not address the root causes.
Voters will choose Sunday based less on ideology than who is best prepared to face reality. No one has yet made a convincing case for this.
The post German election countdown: Uncomfortable truths about Germany’s economic and political state will be updated as new information becomes available.
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