Stratfor's 2017 Annual Forecast predicted that the German general elections would lead to a more divided parliament and difficult coalition talks, as voters showed a willingness to support smaller parties. The results of the elections, which took place Sept. 24, confirmed our prediction, as six parties won seats in parliament and smaller far-right and far-left parties made strides.
After yesterday's elections produced the most fragmented Bundestag in decades, German political parties must now take on the exhausting task of forming a coalition government. Chancellor Angela Merkel's conservative Christian Democratic Union (CDU) won the largest portion of the vote, while another five parties received enough support to gain seats in parliament. With so many voices earning a say, the negotiations could take weeks if not months. The rest of Europe will be following them closely: Germany's domestic concerns may impact the future of EU reform.
If the CDU and the center-left Social Democratic Party (SPD) repeat their previous coalition again, they would control a comfortable majority of parliament. But the SDP, which earned second place, has stated that it won't partner with Merkel's party this time around. In the coming weeks, then, the CDU will be reaching out to smaller political forces. Since alliances with either the far-right Alternative for Germany (AfD) party or the far-left The Left are out of the question, the two biggest contenders for a coalition with the CDU are the pro-business Free Democratic Party (FDP) and the environmentalist Greens. But while the CDU and the FDP are on similar pages when it comes to cutting taxes and keeping a balanced budget, the Greens have promised higher public spending and a strong environmentalist agenda. And when it comes to the European Union, the Greens defend deeper continental integration, while the CDU supports a slow and progressive approach and the FDP is reluctant to pool resources and share risks with Southern Europe. Further complicating things is the CDU's sister party in Bavaria, the Christian Social Union, which will also participate in negotiations and will urge the government to move further to the right to compete against the AfD.
Indeed, Germany's two biggest political parties, the CDU and the SDP, underperformed in the elections. After governing together during eight of the past 12 years, the parties' unique identities have become diluted, with voters seeing no substantial difference between them. If they want to keep their competitors at bay, both parties will have to move away from the political center and establish bolder policy positions. And that may happen soon: Many CDU members will likely blame the party's poor performance on Merkel not being tougher on immigration, while SPD members will blame their candidate, Martin Schulz, for not offering more attractive policies for low-income German workers.
Where Germany's larger, more centrist parties stumbled, its smaller and more extreme parties found success, especially on the right. AfD not only took votes from the CDU and, to a lesser extent, the SPD, it also managed to attract voters who skipped the 2013 elections entirely. Furthermore, the success of the AfD — arguably a single-issue party focused on immigration — indicates that Germany has finally broken the taboo of voting for nationalist parties. Fears stemming from global refugee crises are unlikely to disappear anytime soon. The AfD could have staying power, though now the party faces the challenge of broadening its appeal while preserving its anti-establishment profile.
On an international level, EU leaders and institutions hoping to launch a debate about the future of the bloc right after the German elections, like France, may have to reconsider, because Germany's domestic concerns could postpone their plans. On Sept. 26, the French government intends to announce proposals for eurozone reform, including plans to increase spending in the Continent and create a separate budget for the eurozone. Paris' original goal was to make the announcement immediately after the elections to influence coalition talks in Germany. But the new government in Berlin will probably want more moderate changes than Paris would like. Already, the AfD is attacking the European Union, the FDP is criticizing Southern Europe and the CSU is demanding tougher stances on immigration and security. Merkel may struggle to defend the cause of European integration.
The Greek government is probably worried as well, as it was hoping to negotiate debt relief measures with its lenders in the coming months. The CDU is divided on the issue, but the FDP, which has suggested Greece could leave the eurozone, could make it even harder for Athens to receive longer repayment periods or lower interest rates. The results are a mixed bag for the United Kingdom as well: Long coalition talks in Germany could delay Brexit-related agreements between Brussels and London. Still, the FDP and large portions of the CDU support a comprehensive free trade agreement to preserve Germany's access to British markets.
Meanwhile, anti-immigration governments in countries such as Poland and Hungary probably feel vindicated by the German electorate that voted for the far right. These governments are concerned about France's push for a multi-speed Europe, which would leave non-euro countries behind. Germany's reluctance to introduce such reforms could ease some worries in Central and Eastern Europe. They may even be further validated by the results of Austria's upcoming general election, where immigration will again be a key issue.
But as expected, the results of the German elections don't pose an immediate threat to the European Union. While AfD's strong performance indicates that anti-immigration and Euroskeptic sentiments are growing, most voters still supported moderate parties. But Germany's fragmented government will influence European institutions in the long run. These institutions will have to adjust to the fact that a slightly weaker Merkel may not be in a position to negotiate the deep, comprehensive EU reform they were hoping for.