The results of the German elections have sent shock waves throughout Europe, but it is possible that he has felt a little staggered. Although the alternative for Germany had a performance slightly above expectations, the ruling Christian democratic union seems to remain in power as part of a wide coalition.
This will probably include the Social Democratic Party of the left center, whose proportion of the vote has accumulated its lowest value since the Weimar Republic prior to the war. The result is interesting from a political perspective and reflects a trend of extreme -right gains in Europe.
But, to what extent will this influence the policies of the new coalition and its incoming leader? More pertinently for us, what impact is that this has this in companies and the economy in the short medium term, both in Germany and throughout Europe?
Who won the German elections?
The choice marks a nervous victory for the CDU, with its 28.6% participation of the vote that is not necessary to meet the requirements for a majority government. On the other hand, the party and its new leader Friedrich Merz will seek to form a coalition that excludes the second place AFD and embraces the parties around the political center. This will probably include the SPD, whose leader Olaf Scholz directed the last coalition, but whose support has collapsed since he won the last elections in 2021.
AFDS 20.8% of the votes came despite a series of scandals in recent years, including several parliamentarians suspended by Nazis comments, and some officials involved in secret meetings on the deportation of naturalized German citizens. The election also repeated a trend that is seen among young people, where the gene generation is abandoning the political center, in both directions. While AFD obtained 21% of the votes among young people aged 18 to 24, who obtained 26%, with the SPD with 11% and green in 10%.
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The 8.8% participation of Die Linke of the general vote repeats a remarkable change, after the party looked like Bundestag’s yeast completely in the last elections. The wide strip of the parties that find similar success is also a marker of a healthy democracy and the benefits of proportional representation. This is a double sword for the CDU and the new coalition, since it is easy to group and oppose Afve, and more difficult to govern together to stop them.
Avoid alternative
Whatever the result of the departure on the growth of the extreme right in Europe, there is still no tangible threat whenever other parts refuse to work with them. 20% of the vote still means that 80% of the country in opposition, and a coalition will continue to be possible without them, provided that similar forces align. However, events in France show that forming consensus among multiple parties can lead to disagreements, instability and inaction, all of which can end up promoting the support of the marginal party.
However, like his counterparts in the United Kingdom and France, Merz has tried to counteract AFD adopting part of his rhetoric, including some events that may interest companies. The incoming leader has spoken extensively about how Europe needs to defend himself and face the fact that the United States cannot trust a military or economic partner following the sanctions of Donald Trump. Strengthening the country’s military force will be a focus, which will benefit some companies, but the economy will be the front and center of policy formulation.
German manufacturing has suffered in recent years, particularly in its automotive sector, which faces the threat of Chinese EVs and autonomous technology. There are also problems to address with energy security, where the country has found its self -sufficient in Russian natural gas exports, placing it in a widespread position as the largest donor in the EU to Ukraine, and the second in general behind the United States. This will be even more pressing if the United States goes back to its support to Ukraine, as it seems increasingly likely.
This could lead to an interesting balance between the political alliance of Germany and its economic requirements. While Merz has talked about making Germany and Europe more independent from the United States and China, Hey also wants to promote bilateral trade as a way of strengthening Germany’s exports. This could lead to Merz withdrawing from the sanctions against Russia and China, and restarts efforts in a commercial use-EU agreement. The success in Eiter Front could be a great victory for any German manufacturing company and exporter.
What Merz means for companies
In addition to improving relations with developed nations, a great aspect of promoting the economic production of Germany will increase exports to developing countries such as Mexico, Mercasur countries in South America and the countries of the South and Southeast Asia. This could be a given challenge of China’s amount has a bone impulse for cement relations in the thesis areas, and form a global alliance with the country, Russia and India to counteract influence. If Trump follows the warmer relationships with Russia (but probably not China, given recent rates), this could interrupt those plans and give Germany an opportunity for growth.
Merz also has ghosts or building a stronger economic alliance with France, creating a joint economic engine in the EU heart. The previous leadership was also the welcome of improved relationships with the United Kingdom, and this makes sense from the perspective of forming a European bulwark against the United States. However, it remains to be seen that this approach gave Keir Starmer’s efforts to court Trump, and his resistance to breaking key lines drawn around Brexit, such as freedom of movement for young people.
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Merz was also due to addressing the fundamental causes of AFD’s growing support. One is immigration and asylum, an area in which the CDU has courted a particular controversy thanks to Angela Merkel’s pulmonary foot policy on asylum. Germany is well considered to have accepted more asylum applicants than any other European nation by some margin, reaching a maximum of 1 million per year in the apogee of the Mediterranean migration crisis.
This has inevitably put a certain amount of tension in public services in Germany, he thought that most of AFD’s support is less directly affected regions by this migration, such in the industrial heart of northern Rhine Westfalia. However, Neverberthing, Merz has already shown a will to go back against Merkel’s traditional rhetoric, and seems to be ready to take a tougher line about migration and asylum, partly after several recent terrorist attacks were blamed. This is a playing book followed by many central or left parties nominally in Europe, more prominent in the United Kingdom, which have adopted the migration policies of their right -wing rivals.
The precise impact of this policy change in companies is uncle. Companies will retain access to the EU labor market through freedom of movement, although as we have previously highlighted, even this has been questioned lately, thanks to an increase in emergency border controls. It is possible that some impact on the lower end of the salary spectrum is felt, as in the service industries, but this remains to be seen, and it could be argued that migrants who have tried to live in Germany that with the end of kind of other European countries.
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What we will inevitably see after the elections, assume that a government can form successful, is a Germany that seeks to scratch its role as the engine and muscle of Europe. This could see neighbors like France, but unlike France, the German political landscape seems more mature for cooperation, and it is less likely to draw the red lines of the PFN. The result should be a more effective front popism that seeks cooperation to strengthen Germany, and produce an economic engine that empowers Germroad and helps people at home.
