Trouble has been building within the German government for some time, so it was no surprise that Christian Lindner finally exhausted the Chancellor’s patience, leading to his dismissal. The three open questions now are – when will the election be held, what will the next government look like and where is there room for speedy policy change.
In the first question, it is rare that Germany has an election outside the cycle, and the first elections largely have the smart will of the Foreign Minister and the president to organize it. A vote of acceptance as true with January 15 that leads to a solution and the elections of March 9 were reported first. However, with the opposition, the CDU pressed hard for a past choice, although all kinds of arguments (Christmas holidays, paper availability) were presented to sustain this. Now an agreement has been concluded for the acceptance vote to be true in December and the February 23 elections
Olaf Scholz may be happy that he has three months to regain some electoral momentum, but given his poor track record, he is simply running down the clock on his career. The other factor Scholz needs to consider is his role at the helm of the Social Democrats, and it is expected that he will face a leadership challenge, with Boris Pistorius the favourite to replace him.
Based on current polls, the CDU is the dominant party and it is likely that Friedrich Merz will become Chancellor, with the CDU/CSU making up the lion’s share of a coalition (including the SD). The chances of the CDU engaging the AfD in talks on a coalition are close to zero in our view.
A Merz led government would be good news in our view – he is robustly centre-right (ex chair of Blackrock Germany, corporate lawyer) and pro-European. An early change would be more aggressive support of Ukraine, and pragmatism on the debt brake (especially in terms of defense spending which he has already hinted at).
The other political spaces of interest fear plans and regulation (housing and industry), and energy policy (Merz is a fervent defender of wind energy and prefers to balance renewable energies with nuclear technologies and fusion)
In general, provided that the surveys meet, this is news for Germany.
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