Bleaker economic prospects in the EU and Donald Trump’s return to the White House threatening trade wars make the snap German election on February 23rd a matter of real concern for the country’s European partners. The steadying hand of Franco-German leadership on the EU rudder appears to be coming adrift, with both Paris and Berlin simultaneously mired in domestic political crisis.
The outgoing Social Democratic (SPD) chancellor Olaf Scholz’s defeat in Monday’s Bundestag confidence motion, triggering an election, was expected. The wheels had come off his three-party “traffic light” coalition, with Scholz last month sacking finance minister, liberal FDP party chief Christian Lindner, due to ideological differences over the budget . His problems with the FDP were compounded by a constitutional court ruling limiting public borrowing.
Scholz’s parting shot to the Bundestag will, however, have been welcomed in European capitals as confirmation of a significant and welcome evolution in German economic thinking that may have important implications in the development of the euro zone, particularly its attitude to collective debt management. The chancellor said that Germany’s decade-long “short-sighted” obsession with balanced budgets had “created an unaffordable burden on our future”.
In an implicit repudiation of the FDP’s fiscal conservatism, Scholz wants to defend welfare spending and increase investment in public infrastructure and defence.
However, he is unlikely to return as chancellor.
Polling suggests the SDP will be in third place in the election, behind the conservative Christian Democratic Union (CDU) and the far-right Alternativ fur Deutschland (AfD). With the FDP unlikely to make the threshold for parliamentary representation, Scholz’s time appears to be up. A CDU-led government with Green or SDP support – or possibly both – looks likely, while polls suggest the next Bundestag will have at least a quarter of MPs from right- and left-wing populist parties.