The German federal election that took place on September 26 is not only about power in Germany but also about Europe and its future.

Angela Merkel exiting after four terms as Kanzler will definitively influence Europe. In this newsletter we examine the challenges at the European level that will have to be met by the next Chancellor, whoever he or she will be.

The next government and some colourful alternatives

Negotiations are on-going to establish a new coalition and allow a new government to be empowered. It may take some time, probably months, according to informed sources - some even speculate that Angela Merkel, as government caretaker, may still be forced to deliver the new year’s traditional speech.

Here are some remarks about the elections and the following steps and possibilities:

- As no party got an absolute majority of votes, a coalition is necessary to form a majority in Parliament, allowing a new government to be approved.

- Recalling the results: Olaf Schulz’s SPD ended with 25,7% of the votes and 206 mandates; Armin Laschet’s CDU/CSU had 24,1% and 196 MP’s; Annalena Baerbock’s Greens would-be Chancellor 14,8% and 118 mandates; FDP – die liberalen – of Christian Lindner, 11,5% with 92 mandates; AfD’s Alice Weidel and Tino Chrupalia 10,3% and 83 seats; and Die Linke, The Left, 4,9% and, thanks to an exception to the election threshold, will be represented with 39 mandates.

- With 735 total seats the majority threshold is 368. This is the largest Bundestag ever, as the enlargement of the party system led to growth in the number of seating places in the German federal parliament.

- A few remarks more: SPD, FDP and Greens increased their vote (the latter with their best result ever). CDU/CSU plummeted (particularly CDU, with its worst result since WW). Young voters chose massively Greens and FDP, illustrating the importance given by new generations to environment or free market.

There are not many solutions ahead, and, excluding the (for the time being) improbable Great Coalition, Germany may be heading to a three national parties’ agreement, the first ever (the German Party that integrated Konrad Adenauer’s governments with CDU/CSU and FDP in the 50s was a regional party). Let us examine the actual alternatives:

- The Jamaica coalition (black, green and yellow, colours of the Jamaican flag and of CDU, Greens and FDP). Armin Laschet would become Chancellor. It remains to be seen how the Greens, whose main strategic goal is climate transition, may cohabitate with two partners pro-business, pro-fiscal discipline, and, in the case of FDP, anti-EU debt issuance. Less likely but not impossible.

- Next, there is the Traffic Light coalition, gathering SPD, Greens and FDP and with Scholz as Chancellor. It is more likely, although the fact that the liberal Christian Lindner has his eyes in the Finance minister job (a claim he does not hide and one that will allow him to impose his hawkish views) is not something that pleases SPD or the Greens.

- The third option, a Grand Coalition between SPD and CDU/CSU, is the current government solution. It was the case four times since WW2. Of Merkel’s four terms, three were black and red – a Stendhal coalition, if you wish. It looks difficult, particularly in view of the terms laid down by Olaf Scholz, which include taxing the rich, reducing taxes for the other citizens and raising the minimum wages - hard to swallow by CDU/CSU.

Excluded is the red-green-red, that would combine The Left with SPD and Green, a kind of Portuguese “geringonça” solution, because it comes short of the 368 threshold.
“Traffic light” has more seats and would have a Chancellor that won the elections. Objectives and policies, though, will be hard to establish in common between the left parties and liberals. But then again, that is also the case of “Jamaica”, and Laschet would be, at least at the beginning, a weak leader.

And what about the solution we called “Stendhal”? There is a long tradition of co-habitation, but an agreement between the leaders of SPD and CDU will not be easy.

So, what will happen? One guess is as good as another. Greens and FDP, “kingmakers”, hold most of the cards and they started conversations between themselves before engaging with the two bigger parties. What seems certain is that it will take time.

Frau Angela Merkel, Deutschland Mutti, may still have to wait some caretaking months. And Europe will hold its breath.

Doubts in times of change 

The European Union, as the rest of the world, faces dire times and multiple challenges. The German people choice will influence it for years to come. A brief overview:

- Economy. Should Christian Lindner get what he seeks – to be finance minister – and impose his views, fiscal discipline will be resumed swiftly. Public investment will not be encouraged or, for that matter, financed. The Central Bank will soften (or withdraw) its intervention. Common EU debt will no longer be authorized, and Next Generation Europe will go down in history as a one-off solution. In any case, it will make a big difference if such a program is managed under a “Traffic Light”, “Jamaica” or “Stendhal” solution. Especially for southern countries – for Portugal – this is a crucial issue.

- EU integration. Will the new government be pro-deepening the European integration, leaning to some of the boldest EU Commission’s proposals, like changing the unanimity decision-making process into a qualified majority procedure in politics such as defence or taxation? In both three-party coalition solutions, there is room for such a trend. The problem is whether there will be enough authority to enforce it, particularly with some European partners. Leadership may be the issue.

- The “Europe First” strategy or “Strategic autonomy”. Previous remarks do not mean that there will be an alignment with President’s Macron EU sovereignty push, particularly when it amounts to an antagonization of the US. Such a stance became more visible than ever after the recent AUKUS agreement – and it includes opposition to NATO’s modernization and a push for EU defence and independence in sensitive technologies. Eastern European countries are opposed to it, and it does not seem probable that the new German government would agree, whoever the ruler will be.

- European Army. Defence and security, even considered separately from the two previous points, are key issues in Europe. Voices defending a common army have raised, particularly after AUKUS, from Ursula von der Leyen (in her State of the Union speech) to Josep Borrell, German Defence Minister Annegret Kramp-Karrenbauer, Macron (bien sûr), among others. Laschet wrote an article early September backing it. But opposition remains under a particularly sceptical form: is it even feasible?

- Brexit and its sequels. Scholz said a few days ago that the fuel crisis in the UK is also a consequence of Brexit: “Free movement of labour is part of the EU (…). We worked very hard to convince the British not to leave the union. Now they decided different, and I hope they will manage the problems coming from that”. As for Laschet, in the article mentioned hereabove, he defended the participation of Brexit Britain in the formation of an EU army. This was before AUKUS, though…

- Standing for democracy in EU. The constant challenge to democracy and the rule of law in some EU countries, with forms of illiberalism attached, has been a headache for Angela Merkel, one problem she did not solve; it can even be argued that her inaction encouraged both Polish and Hungarian leaders to pursue their route versus illiberal democracy and, sooner than later, authoritarianism. Trying to avoid a bitter confrontation over rule of law infringements, she probably did not expect they would go so far as they did. Leadership and authority are once again the key – as addressed next.

- Leadership. Going through the European press on who may be the next Chancellor, one idea is repeated often: “neither Olaf Scholz nor Armin Laschet will be able to provide the EU with strong leadership” (Politico, Sept 28). This is worrying: without natural authority there is no credibility - and leadership will be missing.

- Foreign and proximity policies. Olaf Scholz wants a new policy towards the east and particularly Russia. It should revitalize the principle of OSCE as an EU principle, he said. Dialogue must be restored. Laschet agrees: “with Russia you talk more, not less”. There seems to be no serious discrepancies in this. The devil, nevertheless, may as usual be in the details (even though Ukraine can hardly be described as a detail, for instance).

- China will be a problem to them all. Europe has yet to decide whether China is an adversary that must be faced, a welcome investor or a partner in business. What it cannot be is all those things simultaneously.

- Migrants and Refugees. As the SPD boss claims, integration and protection should be shared with countries in Africa, Asia, and South America. This is a dossier that may cause a serious divisiveness if conservatives and Greens are in the same government. And as the New Pact on Migration and Asylum lingers, the next steps will depend a lot upon the new German government.

- Environment. It goes without saying that the presence of the Greens in the next government – an almost certainty – will keep the climate transition agenda at the top of German priorities. This is something that will please Ursula von der Leyen and her climate transition goal.

- Energy. Environmental issues, as explained hereupon, will be at the top of the German and, therefore, the European agenda. But on the energy side, North-Stream 2 project and its consequences are still a central issue. A “fait accompli”, as US Secretary of State Blinken said? In any case, the new German leader must be sharp and resourceful to address the management of US expectations concerning exports to Europe of their own liquefied natural gas, to which Trump called the “freedom gas”.

- The digital transformation is the twin sister of climate transition. All German parties are of course favourable to it, the question will be at what pace the innovation and competitiveness of the European digital will evolve – and if there will be more public money involved.

These are just examples of issues at stake, with which the next German government will have to deal. What colours it will have may represent a real difference for Europe.

Merkel’s farewell or a sweat auf wiedersehen

During Merkel’s 16 years, she coped with Europe’s sudden growth from 15 to 28 countries. Endured a financial crisis with catastrophic impact over the weaker EU economies like Portugal. Managed skilfully the consequent sovereign debt crisis. Made courageous proposals – often miscomprehended in her own country – in favour of refugees.

Fought for European unity during the long Brexit process. Faced with realism but without concessions the rise of populism in Europe. Challenged Donald Trump and Vladimir Putin. Accepted the beforehand unacceptable debt mutualization (in all but the name) to overcome the tragic consequences of the coronavirus pandemic.

Angela Merkel kept the European project alive.

With a global and European political might, she assured stability and giving politics and politicians a well needed better reputation.

Europe already misses her.