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POLITICS

Four things to know about the German election

After 16 years in power, Angela Merkel is set to retire as chancellor following a general election on September 26th, leaving a gaping hole in German politics. Here's what you need to know about this game-changing election.

Four things to know about the German election
A campaign poster of German Finance Minister, Vice-Chancellor and the Social Democratic SPD Party's candidate for chancellor Olaf Scholz is seen in front of the facilities of aerospace company Premium Aerotec during his visit to the company in Varel, northern Germany, on August 9, 2021, as part of his campaign rally ahead of the September 26th federal elections. Photo: Patrik Stollarz / AFP

In the run-up to a vote that will mark a seismic shift for Europe’s biggest economy, the race to replace Merkel is wide open — as is the question of what the next government will look like.

The Social Democrats (SPD) are currently leading in the polls, ahead of Merkel’s CDU-CSU conservative alliance in second place and the Greens in third.

Why is Merkel leaving?

Merkel, 67, announced that her current and fourth term in office would be “the last” in October 2018, when her CDU had just suffered an electoral setback in the state of Hesse.

The decision marks the first time since 1949 that an incumbent chancellor has not run for re-election.

Appointed chancellor for the first time on November 22nd, 2005, Merkel has been in office almost as long as Helmut Kohl, Germany’s longest-serving leader who was in power for just over 16 years (5,869 days).

She has already overtaken Konrad Adenauer, the chancellor credited with reviving the economy after World War II and who ruled West Germany for 14 years.

What do the Germans want?

The economy and the future of German industry have been important issues during the election campaign.

The country’s flagship car industry is facing an existential crisis precipitated by the decline of the combustion engine and its consequences for the 800,000 workers employed in the sector.

Digitalisation has also been a theme, though Germany is “badly behind” on this, according to Paul Maurice, a member of the Franco-German Studies Committee at the French Institute of International Relations.


Climate change has been a key issue in this election following catastrophic floods in western Germany. Photo: TOBIAS SCHWARZ / AFP

Climate change has also been an important topic, especially after deadly floods hit western Germany in July, killing more than 180 people – a disaster that experts have linked to global warming.

Nevertheless, says Maurice, the campaign has been “very (person) centred, with not enough talk of the parties’ programmes” — a phenomenon he suggest could be down to the “Merkel effect”.

What does the election mean for Europe?

As the most powerful country in Europe, Germany plays a key role in the European Union.

From the financial crisis in the eurozone to the conflict in Ukraine and the thorny issue of migration, Merkel has left deep footprints in European politics.

READ ALSO: An era ends: How will Germany and the world remember the Merkel years?

The arrival of a new chancellor will be a big change for the bloc – with the sometimes rocky but crucial Franco-German relationship keenly in focus, also because France goes to the polls in April 2022.

Once a new government is in place, Germany will be expected to bring some fresh momentum to the European Union, says Maurice.

What will happen after September 26?

Merkel cannot just go home and put her feet up as soon as the election is over, but will be expected to continue to run the country until her successor is elected by Germany’s lower house of parliament, the Bundestag.

Usually the party with the most votes will try to form a coalition with one or two other parties, which must then draw up a roadmap together for the future government in the form of a “coalition contract”.

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First there will be informal talks, followed by actual coalition negotiations.

In 2005, the CDU-CSU and SPD took two months to form a so-called grand coalition. But after the September 2017 elections, negotiations lasted until February 2018.

The CDU-CSU first tried to reach an agreement with the Greens and the liberal FDP, but the liberals  withdrew from the talks, forcing the conservatives to settle for another alliance with the SPD.

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ECONOMY

‘Turning point’: Is Germany’s ailing economy on the road to recovery?

The German government slightly increased its 2024 growth forecast Wednesday, saying there were signs Europe's beleaguered top economy was at a "turning point" after battling through a period of weakness.

'Turning point': Is Germany's ailing economy on the road to recovery?

Output is expected to expand 0.3 percent this year, the economy ministry said, up from a prediction of 0.2 percent in February.

The slightly rosier picture comes after improvements in key indicators — from factory output to business activity — boosted hopes a recovery may be getting under way.

The German economy shrank slightly last year, hit by soaring inflation, a manufacturing slowdown and weakness in trading partners, and has acted as a major drag on the 20-nation eurozone.

But releasing its latest projections, the economy ministry said in a statement there were growing indications of a “turning point”.

“Signs of an economic upturn have increased significantly, especially in recent weeks,” Economy Minister Robert Habeck said at a press conference.

The ministry also cut its forecast for inflation this year to 2.4 percent, from a previous prediction of 2.8 percent, and sees the figure falling below two percent next year.

READ ALSO: Can Germany revive its struggling economy?

“The fall in inflation will lead to consumer demand — people have more money in their wallets again, and will spend this money,” said Habeck.

“So purchasing power is increasing, real wages are rising and this will contribute to a domestic economic recovery.”

Energy prices — which surged after Russia’s 2022 invasion of Ukraine — had also fallen and supply chain woes had eased, he added.

Several months ago there had been expectations of a strong rebound in 2024, with forecasts of growth above one percent, but these were dialled back at the start of the year as the economy continued to languish.

‘Germany has fallen behind’

But improving signs have fuelled hopes the lumbering economy — while not about to break into a sprint — may at least be getting back on its feet.

On Wednesday a closely-watched survey from the Ifo institute showed business sentiment rising for a third consecutive month in April, and more strongly than expected.

A key purchasing managers’ index survey this week showed that business activity in Germany had picked up.

And last week the central bank, the Bundesbank, forecast the economy would expand slightly in the first quarter, dodging a recession, after earlier predicting a contraction.

German Economics Minister Robert Habeck

Economics Minister Robert Habeck (Greens) presents the latest economic forecasts at a press conference in Berlin on Wednesday, April 24th. Photo: picture alliance/dpa | Michael Kappeler

Despite the economy’s improving prospects, growth of 0.3 percent is still slower than other developed economies and below past rates, and officials fret it is unlikely to pick up fast in the years ahead.

Habeck has repeatedly stressed solutions are needed for deep-rooted problems facing Germany, from an ageing population to labour shortages and a transition towards greener industries that is moving too slowly.

“Germany has fallen behind other countries in terms of competitiveness,” he said. “We still have a lot to do — we have to roll up our sleeves.”

READ ALSO: Which German companies are planning to cut jobs?

Already facing turbulence from pandemic-related supply chain woes, the German economy’s problems deepened dramatically when Russia invaded Ukraine and slashed supplies of gas, hitting the country’s crucial manufacturers hard.

While the energy shock has faded, continued weakness in trading partners such as China, widespread strikes in recent months and higher eurozone interest rates have all prolonged the pain.

The European Central Bank has signalled it could start cutting borrowing costs in June, which would boost the eurozone.

But Habeck stressed that care was still needed as, despite the expectations of imminent easing, “tight monetary policy has not yet been lifted.”

In addition, disagreements in Chancellor Olaf Scholz’s three-party ruling coalition are hindering efforts to reignite growth, critics say.

This week the pro-business FDP party, a coalition partner, faced an angry backlash from Scholz’s SPD when it presented a 12-point plan for an “economic turnaround”, including deep cuts to state benefits.

Christian Lindner, the fiscally hawkish FDP finance minister, welcomed signs of “stabilisation” in the economic forecasts but stressed that projected medium-term growth was “too low to sustainably finance our state”.

“There are no arguments for postponing the economic turnaround,” he added.

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