Germany: Coalition risks and reform hurdles – Commerzbank

Commerzbank’s Dr. Ralph Solveen analyzes how the Saxony-Anhalt election and two subsequent votes in Berlin and Mecklenburg-Western Pomerania could strain Germany’s CDU/CSU–SPD coalition. He highlights likely poor results for traditional parties, potential leadership changes at the SPD, and diverging policy responses to AfD strength, suggesting that planned federal reforms will become more difficult but the coalition should survive.

AfD gains complicate federal reforms

"For the financial markets – at least in the short term – the significance of this election stems primarily from its potential impact on the current governing coalition the Christian Democrats (CDU), their Bavarian sister party CSU and the Social Democrats (SPD) at the federal level."

"... however, it is likely to be more important that the CDU and SPD’s projected poor showing would put noticeable strain on the coalition at the federal level, thereby further complicating the upcoming reforms."

"But even if the coalition at the federal level – as we expect – will survive the upcoming elections, the election results in the three Eastern German states will not make the planned reforms any easier."

"This is likely to complicate cooperation within the coalition."

"If the CDU were even to opt for a minority government – which would rely on votes from the AfD on many issues – the coalition at the federal level would be at risk."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)