The German elections have delivered a victory for Friedrich Merz’s CDU and its Bavarian sister party, CSU, with around 28% of the vote. The far-right AfD emerged as the second-largest party at 20%, followed by the SPD (16%), the Greens (12%), the Left Party (9%), and BSW (5%). The FDP, at 9:00 PM CET, remained just below the 5% threshold required to enter parliament, leaving its fate uncertain. A final shift in results could still influence the balance between BSW and FDP.
Voter turnout soared to 84%, the highest since reunification. The election results reflect a historic shift: the three-party governing coalition collapsed, losing 18 percentage points from its 2021 performance, with the SPD and FDP hit hardest. Meanwhile, far-right and far-left parties gained nearly 20 percentage points, now controlling almost 30% of the vote. Despite winning, the CDU/CSU registered its second-weakest result ever, while the SPD suffered its worst-ever performance. The four mainstream parties—CDU/CSU, SPD, Greens, and FDP—once dominated with nearly 90% of the vote in 2002. Today, they barely surpassed 60%. Germany’s political landscape has never been more fragmented.
Complicated Coalition Talks Ahead
Germany now faces highly complex coalition negotiations. The CDU and CSU spent the campaign attacking the Greens, at times outright rejecting a coalition. In a fragmented landscape, ruling out centrist allies may prove a costly mistake.
It remains unclear whether FDP and BSW will enter parliament. If BSW secures seats but FDP falls short, CDU/CSU would need two coalition partners—SPD and the Greens—raising the possibility of CDU bowing to Green demands, triggering fresh elections, or even an unprecedented alignment with AfD.
The only viable option for a CDU-led government is a coalition with SPD and Greens. If BSW fails to enter parliament, the CDU/CSU and SPD could revive their traditional grand coalition. Should FDP make it, a CDU/CSU-SPD-FDP coalition becomes possible. Though Merz calls for swift coalition talks, potential partners may struggle. The SPD, reeling from its worst-ever result, faces internal turmoil and possible leadership changes. A coalition deal may require a grassroots vote. Meanwhile, tensions between CDU/CSU and the Greens have escalated, complicating any partnership.
Economic Implications of Potential Coalitions
Regardless of the final coalition, Germany’s economic stagnation must take priority. The government’s ability to push through reforms will depend on whether parties prioritize national interests over political rivalries. Failure to act could bolster AfD in the next election. A stricter immigration policy appears more likely than a comprehensive economic reform package.
CDU/CSU and SPD
A grand coalition could deliver tax cuts for households and businesses while maintaining social spending. Full-scale debt brake reforms remain unlikely, but special infrastructure and defense funding vehicles could emerge. Germany might also open up to EU-led financing for defense and infrastructure.
CDU/CSU, SPD, and Greens
A fragile coalition unlikely to survive a full term. Tax cuts and deregulation would be possible, along with special funding for infrastructure and defense. However, deep divides over energy policy could keep energy costs high. From a European perspective, this coalition might eventually enable greater EU defense and infrastructure cooperation.
CDU/CSU, SPD, and FDP
This coalition would prioritize tax cuts while considering expenditure reductions. The FDP would likely limit large-scale investment programs, though leader Christian Lindner has left the door open for targeted fiscal tools. Expect fiscal prudence, with defense spending prioritized over infrastructure. This scenario would signal a return to Germany’s traditionally strict budgetary discipline.
The Road Ahead
Germany and Europe long for political and economic stability, but this election may only deepen uncertainty. While a new leadership could offer a psychological boost, prolonged coalition negotiations could quickly dampen optimism. The next government will struggle to enact meaningful economic reforms, likely delivering only modest tax cuts, minor deregulation, and limited investment initiatives. The real question is whether the new leadership understands the urgency of the moment—or whether Germans will remain waiting for change.
