Germany’s post-Merkel era: the coalition options and what they mean11 min read

German election updates</p>

Germany is entering a phase of intense coalition talks after national elections to determine Chancellor Angela Merkel’s successor produced a tight result.

The centre-left Social Democratic party (SPD) and its chancellor candidate Olaf Scholz secured the biggest tally, closely followed by Merkel’s own conservative Christian Democratic Union and its Bavarian sister party the Christian Social Union (CDU/CSU), a bloc led by Armin Laschet.

The SPD and CDU/CSU could each command a majority of seats in parliament if they secure the support of both the Free Democrats (FDP) — a liberal party with a strong free-market ethos — and the Greens, with their emphasis on battling climate change. Alternatively, the SPD and CDU/CSU could form another “grand coalition”, although both have said they do not want to govern together again.

It will not be easy to bridge differences. Here are the various scenarios and the parties’ pledges.

The coalition options

SPD-Green-FDP — the ‘traffic light’ coalition

Called the “traffic light” coalition after the three parties’ signature colours of red, green and yellow, such a grouping would be led by the SPD. It is likely to be the first option under consideration, given the narrow victory achieved by Scholz’s party in the election.

There is some policy overlap between the three parties — they all want to modernise Germany’s economy and public administration.

But there are big differences. The SPD and Greens want to raise taxes on the rich and unleash an investment drive; the FDP is opposed to tax hikes and any changes to Germany’s constitutional “debt brake” — its tight restriction on new borrowing. The SPD would probably have to make big concessions to the FDP to bring it into the fold, which would probably mean handing it the finance ministry.

Such a coalition may also force an internal reckoning for the SPD: Scholz is on the conservative wing of his party and is seen as the reason it came out ahead, but the SPD’s leaders are more leftwing. Their potential partners will be looking to see who sets the tone in negotiations.

CDU/CSU-Green-FDP — the ‘Jamaica’ coalition

Jamaica coalition

Known as “Jamaica” because the party colours are the same as those of the Jamaican flag, this is the favoured option of the FDP and the only option for a government led by the CDU/CSU.

The FDP and CDU/CSU are each other’s preferred governing partners. But this combination would require a stronger offer to the Greens — which again raises the issue of their starkly divergent visions on taxation as well as climate and modernisation policies underpinned by public investment.

The Greens could be tempted into this offer if the conservative parties offered them a “climate protection ministry” — with the power to veto any policies that would hinder Germany’s ability to meet its climate commitments under the Paris Agreement — or the finance ministry.

But both smaller parties may feel reluctant to take up an offer from the CDU/CSU, given the party’s weakness. Its election result was the worst in its history, and Laschet is under intense pressure. The FDP and Greens may not want to be seen as going against the popular vote that gave the SPD a slight lead.

SPD-CDU/CSU — the ‘grand coalition’

Grand coalition

Should the “grand coalition” return, it would be flipped: instead of being junior partner the SPD, having won the election, would take the lead role.

This is seen as the most unlikely option for now — neither grouping wants to govern together again, and Scholz has said the CDU should go into opposition. Moreover, the result of Sunday’s election seemed to reflect a strong desire for change — which another grand coalition would be unlikely to deliver.

The most obvious line of dispute would be over taxes.

The policy platforms

Fiscal policy

Nothing divides the parties as much as this issue. Those on the left want to raise taxes, boost investment and relax Germany’s strict fiscal rules, whereas those on the right rule out tax increases and swear allegiance to the “debt brake”.

SPD

Olaf Scholz, the SPD’s candidate for chancellor
Olaf Scholz, the SPD’s candidate for chancellor
  • More new borrowing, but only within the framework of the debt brake

  • Higher rate of income tax for top earners

  • Maintain ‘Soli’ for the 10% of top earners — the solidarity surcharge on taxes introduced to pay for German reunification

  • Reintroduce wealth tax, with a 1% tax on large assets

  • Reform inheritance tax

  • Introduce a financial transaction tax

CDU/CSU

CDU leader and candidate for chancellor, Armin Laschet © CDU leader and candidate for chancellor, Armin Laschet
  • No tax rises

  • No change to debt brake

  • Swift return to balanced budgets

  • Tax on corporate profits to be capped at 25%

  • Gradual abolition of the ‘Soli’

FDP

FDP leader Christian Lindner © FDP leader Christian Lindner
  • No change to debt brake

  • Top rate of income tax should apply only to annual income above €90,000

  • Abolish ‘Soli’

  • No wealth tax or increase to inheritance tax

  • Welfare spending capped at 50% of budget

  • Corporate tax reduced to 25%

Greens

Annalena Baerbock, candidate for chancellor
Annalena Baerbock, candidate for chancellor
  • Debt brake to be relaxed to allow borrowing for investment

  • Higher top rate of income tax

  • Wealth tax of 1% on assets above €2m

  • Massive investment offensive — totalling €50bn a year over the next decade — in areas such as fast internet, renewable energy and ‘climate-neutral infrastructure’


Foreign policy

Another main point of contention. On China, the CDU/CSU cleaves to Merkel’s even-handed policy, seeing Beijing as both a rival and potential partner. The Greens are much tougher, saying they want to hold China to account for human rights abuses in Hong Kong and Xinjiang.

SPD

  • Turn the EU Stability and Growth Pact (the bloc’s fiscal rules) into a ‘Sustainability Pact’

  • Push for European capital markets union

  • Less conservative fiscal policies; rather a ‘social-ecological’ investment policy

  • Europe should be leader in international crisis prevention

  • Qualified majority voting in EU foreign policymaking, rather than unanimity

  • New start in relations with US

  • Commitment to Nato

CDU/CSU

  • Reform the European Stability Mechanism (the eurozone’s provider of emergency loans, set up after the 2011 eurozone debt crisis)

  • Complete banking and capital markets union

  • Maintain sanctions against Russia

  • Continue to see China as a ‘competitor, partner and systemic rival’ but co-operate with Beijing ‘where possible’

  • Strong commitment to Nato and its goal to spend 2% of GDP on defence

  • Armed forces should get armed drones and rise from 184,000 strength to 203,000

  • New national security council to co-ordinate foreign and defence policy

FDP

  • Strengthen EU institutions such as European parliament

  • Qualified majority voting in EU foreign policymaking

  • Need for a European army

  • Strict adherence to EU fiscal rules in Stability and Growth Pact

  • No move to turn the EU into a ‘debt union’

  • New start in relations with the US

  • Commitment to Nato

Greens

  • Qualified majority voting in EU foreign and defence policy

  • More EU investment in climate protection, digitisation and education

  • Turn Stability and Growth Pact into a permanent ‘investment and stabilisation instrument’ controlled by the European parliament

  • Stop Nord Stream 2 gas pipeline from Russia

  • New strategic direction for Nato, including resumed security dialogue and military contacts with Russia

  • Reject Nato goal to spend 2% of GDP on military


Climate and environment

The Greens have the most ambitious goals, while the CDU/CSU and SPD want to ensure Germany achieves its climate objectives without losing its status as Europe’s industrial powerhouse.

SPD

  • Carbon neutrality target: 2045

  • Electricity should be entirely renewable by 2040. Make Germany a leader in hydrogen technology by 2030. Abolish the EEG (the consumer surcharge on electricity bills to fund renewables) by 2025

  • Public transport to be made more climate friendly. Make rail travel cheaper than flying in Europe

  • Cars: aim for at least 15m fully electric cars on German roads by 2030. 130kph speed limit

  • Carbon pricing: low-income residents should be compensated for increases in carbon taxes

CDU/CSU

  • Carbon neutrality target: 2045

  • By 2030, a 65% reduction in emissions compared with 1990; by 2040, an 88% reduction. Emissions trading should be increased and expanded across Europe

  • Renewable energy: immediately scrap the EEG; accelerate the expansion of renewables and make Germany the number one hydrogen producer

  • Public transport: expansion of railways and more night trains across Europe

  • Cars: expand use of electric cars and vehicles using synthetic fuels. No ban on diesel vehicles, no speed limit

FDP

  • Carbon neutrality target: 2050

  • Quickly extend emissions trading to all sectors

  • Renewable energy: abolish the EEG and electricity tax. Support renewable energy with focus on hydrogen

  • Privatise trains to cut prices and improve services. Railway networks should remain state-owned

  • No ban on fossil fuel vehicles, no speed limit, no subsidies for electric vehicles

  • Carbon pricing: implement uniform, market-based price worldwide. Counter rising costs through a ‘climate dividend’ from CO2 revenues to citizens

Greens

  • Carbon neutrality target: within the next 20 years. Exit from coal should be brought forward from 2038 to 2030

  • Reduce emissions by 70% by 2030. By 2035, Germany should depend fully on renewable energy

  • Invest €100bn in railways and stations by 2035. Trains should make short-haul flights superfluous by 2030. Improved rural public transport

  • Cars: 15m electric vehicles on the streets by 2030, new vehicle registrations at that point only for emissions-free cars. Speed limit of 130kph

  • Carbon pricing: raise to €60 a tonne by 2023 and gradually increase further. Carbon tax revenues should be paid back to citizens


Migration

While Germany’s previous election was fought in the shadow of the refugee crisis, immigration has not featured so prominently in this year’s campaign. Most parties set great store by reform of Europe’s asylum rules while some, like the FDP, stress the need for more deportations of failed asylum-seekers.

SPD

  • Reform EU asylum system through joint distribution mechanism

  • Improve legal pathways to asylum and address root causes of migration. Facilitate permanent residency for well-integrated immigrants

  • Lift restrictions on family reunification

  • No forced deportations to dangerous countries

  • Modernise citizenship law to allow multiple nationalities. Remove hurdles to naturalisation

CDU/CSU

  • Reform EU asylum system to address root causes of flight, and create common standards on sharing costs and burdens

  • Cut number of refugees to Germany

  • Targeted immigration seen as an asset — provided it is orderly and leads to successful integration

  • Simplify procedures for recognising foreign qualifications

FDP

  • War refugees to be offered temporary humanitarian protection, and be distributed among EU member states

  • Improve pathways to legal immigration. Adopt Canada-style points-based system for immigration

  • Well-integrated refugees with temporary protection status should be able to immigrate and enter workforce

  • Enforce consistent deportation of rejected asylum seekers

  • Streamline naturalisation process and decrease to four years; allow multiple nationalities

Greens

  • Develop mechanism to register refugees at external EU borders and swiftly distribute them

  • Reject all camps and transit zones. Reject deportations to so-called ’safe countries of origin’ or to countries at war or in crisis

  • Offer pathways for migration for education and work, including for low-skilled labour

  • Lift restrictions on family reunion

  • Accelerate asylum procedure and offer right to stay to those with irregular status after five years

  • Ease citizenship and naturalisation laws; allow multiple nationalities


Pensions

Economists predict a looming pensions crisis in Germany, a country with an ageing population and poor demographic outlook. But the main parties have shied away from radical reform of the system.

SPD

  • Keep pensionable age at 67

  • Pension ratio (ie the ratio of a worker’s pension to their average salary) to be maintained at 48 per cent

  • Everyone should be required to pay into the state pension scheme, including the self-employed

  • Occupational pensions should be expanded and made more attractive

CDU/CSU

  • Maintain pensionable age at 67

  • Consider the creation of capital-based pension provision

  • Self-employed people will be required to pay into a pension scheme

FDP

  • Make pensionable age more flexible. Some people should be able to decide at the age of 60 if they want to retire

  • Introduce ‘share pension’, in which a small part of an employee’s pension contribution is invested in a fund 

Greens

  • Stick to pensionable age of 67 but make it simpler for people to retire earlier or later

  • Pension ratio to be maintained at 48%

  • Turn pension provision into a ‘citizens’ insurance’ involving more people, such as the self-employed and MPs

  • Consider creation of capital-based pension provision

  • Employers should offer workers an occupational pension

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