[Global Focus] CDU and SCU Lead in Approval Ratings... Economic Crisis Reshapes German Political Landscape

The federal parliamentary election that will determine Germany's fate for the next four years will be held on the 23rd (local time). Germany, often called the 'engine of the European economy,' is currently facing a prolonged economic recession, and resentment toward the refugees who have arrived over the past decade has reached its peak. It is widely expected that the direction of national governance will change depending on the outcome of this election. The results of this German election are also expected to reshape the political landscape across Europe.

Yonhap News

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At the end of last year, Chancellor Olaf Scholz dismissed Christian Lindner, the leader of the Free Democratic Party (FDP) and Minister of Finance, following conflicts over the budget while they were forming a coalition government. However, the Social Democratic Party (SPD) led by Scholz, holding 206 seats, and the Green Party with 118 seats, together could not reach the majority threshold of 368 seats out of the total 736 seats, leading to the collapse of the coalition government. Scholz reached out to the opposition Christian Democratic Union (CDU) and Christian Social Union (CSU) alliance to maintain the coalition, but was rejected, and on the 16th of last month (local time), he was voted out of confidence in the Bundestag. Consequently, Scholz immediately requested the dissolution of parliament and an early election, which was scheduled seven months earlier than originally planned, on the 23rd.

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Chancellor Scholz officially declared his intention to seek re-election and launched his campaign with pledges to support ordinary citizens, including lowering the value-added tax on groceries. However, current forecasts predominantly predict that Scholz will be ousted in the early election due to the very low support for the SPD, his party.

Looking at the current support rates, the centrist-conservative CDU and its sister party CSU alliance are expected to secure the most seats and likely lead the formation of the next coalition government. The CSU operates in Bavaria, while the CDU is active in the other 15 states, and together they form a parliamentary group, effectively functioning as one party.

According to a ZDF broadcast poll released on the 7th, the CDU-CSU alliance leads with 30% support, followed by the far-right Alternative for Germany (AfD) at 20%. The SPD and the Green Party, which are temporarily forming a centrist-progressive minority government after the collapse of the 'traffic light' coalition, each hold 15%. The left-wing populist party Alliance Sahra Wagenknecht (BSW) has 5%, while the FDP and the Left Party each have 4%.

The formation of a coalition by the CDU-CSU is one of the key points to watch in this election. The direction of government operations could change depending on which parties they partner with. Under Germany's political system, unless a single party secures a majority of seats, two or more parties must jointly form the government. If the seats are distributed according to recent polling, the CDU-CSU and SPD would need to join forces to barely form a majority government. Failure to reach a coalition agreement could lead to another federal election.

A notable change sensed in this German election is the strong performance of the far-right and left-wing parties, which were previously almost marginalized. If these two parties, long shunned by the established political circles, secure meaningful representation in this election, the German political landscape could shift. These parties have often been treated as fringe groups in negotiations and decision-making processes. However, signs of change are emerging, as seen when the CDU, aiming to regain power, attempted to revise laws in cooperation with the AfD on immigration policy.

How the ruling government will tackle the economic crisis is also a matter of interest. Judging from the statements of Friedrich Merz, the CDU leader who is the frontrunner for the new chancellor, it seems unlikely that large-scale expansionary policies will be pursued. He maintains the stance that "today's debt is tomorrow's tax" and suggests adherence to constitutional debt provisions. Unlike former Chancellor Angela Merkel, who pursued a liberal policy line, Merz is considered a right-leaning figure advocating for blocking illegal immigration and reconsidering the nuclear phase-out. CNN commented, "If Merz becomes chancellor, it means the end of CDU's centrist policies."

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Germany's political crisis stems from its damaged economy. As the economy deteriorated, political conflicts intensified, and people blamed the ruling powers' incompetence for the economic hardship. The rise of the far-right party is also attributed to the economic crisis.

Germany's real economic growth has stalled since the COVID-19 pandemic. According to the Financial Times (FT), Germany's GDP decreased by 0.2% last year compared to the previous year. Following a 0.3% decline in 2023, this marks two consecutive years of negative growth. This is the first time in 21 years, since 2002-2003, that Germany's economic growth rate has been negative consecutively.

Timo Bulmershoizer, an economist at the Ifo Institute in Munich, stated, "Germany is experiencing the longest stagnation in its post-war history. Internationally, its performance is also quite poor."

High energy costs, rising interest rates, and intensified export competition are the main factors worsening the economy. Federal Statistical Office President Ruth Brandt analyzed, "Cyclical and structural pressures are the main causes of Germany's poor economic performance. Intensified competition in Germany's export industries, high energy costs, high interest rates, and uncertain economic outlook are the problems."

Even the automotive industry, which has driven Germany's economy, is struggling against competition from China. The German automotive sector is in recession due to rising energy costs, competition with China, costly transitions to electric vehicles, and weak consumer demand. Exports of electronics, machinery, and automobiles declined by 0.8%, while imports increased by 0.2%. Volkswagen, known as Germany's 'people's car,' announced plans to close three out of its ten domestic factories, starkly illustrating the crisis in Germany's automotive industry.

The Russia-Ukraine war is also cited as a major factor deepening the energy supply crisis and thus the economic crisis. Since Russia's invasion of Ukraine in February 2022, it cut off its gas supplies to Europe. As energy prices soared, other European countries like France restarted nuclear power plants to replace Russian gas. However, Germany maintained its nuclear phase-out policy, and the rising energy costs further worsened the already stagnant German economy.

"After Russia's invasion of Ukraine in 2022 and the subsequent halt of Russian natural gas supplies, the Scholz government quickly imported liquefied natural gas (LNG) to keep homes warm, but gas prices rose 40% compared to the previous year. Nevertheless, the government proceeded with plans to shut down the country's last nuclear reactors," the New York Times (NYT) described the atmosphere at the time.

This situation does not seem likely to reverse soon. The German central bank, Bundesbank, expects stagnation to continue this year as well. It forecasts Germany's economic growth rate to be around 0.1% this year. To make matters worse, with former U.S. President Donald Trump threatening tariff bombs on various countries, Germany's economy, which is manufacturing-centered and export-driven, is expected to contract further.

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