Saxony and Thuringia comprise 6mn people, only 8% of the German total, but elections in both states (Brandenburg is on the 22nd September) have, as we have highlighted in recent notes, heaped pressure on Olaf Scholz’ government.
For the traffic light coalition, the results were awful – the government garnered less than 12% of the vote in the two eastern states, in which the winners were the quirky (far left combined with far-right) BSW, the centre-right CDU and of course the notorious AfD.
If this election were repeated on a national scale it could lead to the annihilation of the FDP, possibly the Greens and one of the worst performance for Scholz’ Social Democrats. For the time being, these state elections will sap the energy and credibility of the government.
More specifically, in Saxony and Thuringia, the cordon sanitaire around the AfD will mean that forming local governments in the two states will be difficult, and a strange compromise between the either the BSW or ‘Die Linke’ and the CDU may need to be found.
From a broad policy point of view the focus is now intensely on Scholz, who is becoming a lame duck. There are several possible faultlines (given the next election is beyond August 2025).
Rancour within the coalition, and their ongoing inability to tackle head on the issues bedevilling Germany, could lead to a formal break of the coalition or potentially a vote of confidence in Scholz, and he is replaced.
Relatedly, another scenario is of a ‘take-over’ of Scholz by Friedrich Merz the CDU leader. The CDU is, at this stage, poised to win the next election and Merz (right of centre, very pro-business, pro-EU) become the next Chancellor. If a putsch against Scholz is not forthcoming, it is possible that Merz tries to steer him towards Merz/ policy set, notably on immigration, in exchange for shepherding the Scholz government.
A third, more depressing scenario is that nothing happens, and the Scholz government limps on into 2025. Our sense is that there is enormous frustration across German business (Volkswagen has threatened to close plant in Germany) regarding the lack of policy action and imagine that the ‘status quo’ is increasingly untenable.
The implications for Europe and Ukraie are not positive, combined with Emmanuel Macrons inability to find a viable prime minister, the fact that the two most important European nations are ruderless is not at all helpful.
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