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Jan 22, 2016 | 09:15 GMT

8 mins read

How German Politics Will Change Europe

(SEAN GALLUP/Getty Images)
Forecast Highlights

  • Conservative voters and politicians, increasingly fearful of the economic, social and political repercussions of the refugee crisis, will continue to pressure the German government.
  • German Chancellor Angela Merkel will survive the political impasse, but her policies will change in the coming months as she toughens Germany's asylum policies and remains reluctant to support Greek debt relief.
  • Germany, the largest EU economy, will increasingly question fundamental aspects of Continental integration, including the composition of the eurozone and the free movement of people.

As the European Union continues to fracture, debates in Germany could change Berlin's domestic and foreign policies, reshaping the entire Continent in the process. A group of conservative politicians is questioning German Chancellor Angela Merkel's ability to address the immigration crisis, with some even threatening to launch a no-confidence vote against her. Merkel will probably survive these attacks, but this is the second rebellion against her leadership in less than a year.

Regardless of whether Merkel keeps her job, German conservatives are, and will continue to be, concerned about the rise of anti-establishment and anti-immigration groups in the country. Even if these emerging forces are still far from accessing power, they will influence mainstream parties. In addition, future challenges such as the integration of asylum seekers into the labor force and the economic impact of the downturn in emerging markets will create fertile ground for anti-establishment sentiments to prevail. If Germany takes a more isolationist stance on EU issues, Europe will only further fragment.

The Limits of Rebellion

At this point, dissent among German conservatives is still within tolerable margins. German media reported that 44 lawmakers from the ruling Christian Democratic Union (CDU) and its Bavarian sister party, the Christian Social Union (CSU), sent a letter to Merkel on Jan. 19 asking her to enhance border controls and limit the arrival of migrants. The rebellion is smaller than the one Merkel faced last year, when some 60 lawmakers voted against Greece's third bailout program.

Merkel has several factors on her side, the most important of which is that her party is not ready to replace her. To replace a chancellor, lawmakers need enough votes to appoint a successor. But should the CDU and CSU try to oust Merkel, their coalition partners in the Social Democratic Party (SPD) would probably leave the government and trigger new elections.

Nobody in Germany is ready for elections. The CDU and CSU lack a clear candidate to replace Merkel. The only viable option is the popular finance minister, Wolfgang Schaeuble, but it is unclear whether Schaeuble, who is 73 years old, wants to run. In addition, the CDU and CSU are aware that their popularity is declining. The CDU/CSU alliance is currently polling at around 33 percent, considerably lower than the 41.5 percent of the vote it received in the 2013 general elections. Early elections in this context could see thousands of conservative votes going to the anti-immigration Alternative for Germany party, which is polling at around 12 percent.

The SPD is in a similar situation. The center-left has been stagnating in opinion polls for years, which currently show around 23 percent for SPD, down from 25.7 percent in the general elections. The party has also struggled to voice its ideology, which tends to be sympathetic to asylum seekers, while answering voters' desire for tougher regulations for immigration. Just like the CDU, the SPD has little to gain from early elections.

Why Regions Matter

Merkel's position is safe for now, but things could rapidly become more difficult for her in the coming months. Three states will hold regional elections on March 13. The results will show how the refugee crisis has helped or harmed the popularity of the mainstream political parties. The vote will also highlight the extent to which Alternative for Germany can syphon votes away from the CDU.

The anti-immigration party is polling at around 7 percent in Baden-Wurttemberg and at around 8 percent in Rhineland-Palatinate, in the west of the country. It is probably not enough to enter a government, but conservative politicians are concerned because in the past most of those votes would have gone to the CDU. Alternative for Germany is polling particularly well (around 13 percent) in Saxony-Anhalt in the center-east of the country. A strong performance could motivate members of the CDU to suggest a government alliance with the anti-immigration party.

Even in the likely case that Alternative for Germany fails to enter a regional government, its electoral rise will be enough to influence the behavior of the ruling party's allies, much like the anti-establishment National Front party is in France. The recent combativeness of the Bavarian government, which threatened to sue the federal government, has forced Berlin to take a harder stance on asylum seekers. Merkel and her government have already responded, progressively toughening Germany's migration policies.

The Toll on Europe

Germany's political disputes will alter Berlin's positions on European affairs, especially the refugee crisis. Border controls, which are currently supposed to be temporary, will become the new normal — going directly against the fundamental EU belief in the free movement of people. Germany will also become even more selective in accepting asylum requests; it has already rejected some migrants trying to enter the country from Austria. These decisions will create problems for Austria, since Vienna in turn will have to harden its own refugee policies, triggering a domino effect as countries along the Balkan migration route from Greece to Austria will be forced to introduce similar measures.

Germany will also pressure Greece and Italy to build additional reception centers for migrants, raising tensions with Italy. Another German push to enforce a mechanism to distribute asylum seekers across the Continent would complicate Germany's relationship with Poland, too, and Warsaw is unlikely to cooperate. If the largest economies in Southern and Eastern Europe simultaneously oppose Germany, it would seriously undermine Germany's leadership in European Union.

Finally, Germany will probably demand a stronger commitment from Turkey in preventing asylum seekers from entering Europe, complicating the union's relations with Turkey. German lawmakers will oppose granting Turkey the money Brussels promised to Ankara, and they will resist moves to reactivate Turkey's EU accession process unless Turkey does more to keep migrants in its own territory. This may prove difficult, though, since Ankara's decision to give Syrian refugees the right to work has yet to encourage migrants to stay.

Rebel groups within the CDU and CSU will influence the government's policies on other issues as well. For example, Berlin will maintain a tough stance on Greece. The Greek government is slowly implementing many of the policies required by its bailout agreement, but Athens' main goal is to obtain some form of debt relief. This will be coldly received by Germany, which will continue to resist any debt write-downs. 

Merkel's government will be open to the idea of granting Greece longer maturities and lower interest rates, but only as long as the International Monetary Fund is involved in the process. Germany thinks the IMF is not as politicized as the Eurogroup, where countries such as France and Italy could push for leniency with Greece. The more debt relief talks are delayed, the more likely Greece's coalition government will collapse, since the promise of future debt relief is one of the main things keeping it together.

New German Woes

Beyond the current political impasse, the future holds other new challenges for Germany, the most obvious being how to integrate the refugees into the labor market. At this point, most of the asylum seekers who entered Germany in 2015 are not included in the employment data, because as long as they are applying to become refugees, they are not eligible for work and therefore are not considered in labor statistics.

But some German institutions are already expressing concerns about how fast asylum seekers will be able to find a job. According to the Ifo Center, the majority of refugees would first need extensive training before they can enter the workforce, which would require Germany to invest significant resources to provide. In the meantime, the refugee crisis could lead to a temporary rise in unemployment figures. While most Germans probably will not see their personal situation worsen, some voters may believe that their country is heading in the wrong direction and increase their support for anti-establishment parties.

Germany will also have to contend with the economic uncertainty stemming from the downturn in emerging markets, especially China. The German economy probably will not be seriously hurt by China's slowdown, since demand from the United States and the eurozone will likely offset China's declining need for German imports. However, a poor performance by the Chinese economy (the IMF predicts China will grow by 6.3 percent in 2016 compared with 6.9 percent in 2015) could weaken German growth and again generate more criticism against Merkel. 

At the heart of Germany's political problems are the concerns of a growing number of voters worried about different aspects of EU integration. There is a pervading mistrust of the currency union, which has made negotiations over Greece's bailout program difficult, and of the free movement of people that has attracted asylum seekers to Germany. These fears are affecting German politicians, who are adapting their strategies to represent — and in some cases, to shape — voter expectations. These sentiments will evolve and become critical for the future of the European Union in the coming months as Germany prepares to elect a new government in 2017.

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