Geopolitical Macro Update: A political crisis is unfolding in Germany
By Christian Takushi, Macro Economist, Switzerland – 28 Sep 2017.
On Sunday 24 Sep 2017 Germany experienced probably the biggest surprise in post-war politics. A double shock to Germany and the liberal world order: a “revolt” of mainstream parties against Mrs. Merkel has magnified the rise of the conservative anti-immigration AfD Party as third largest political force. The AfD won 94 seats in the German Bundestag (Parliament). And that double shock was followed yesterday by a dramatic “coup” attempt within the CSU against Mr. Seehofer, leader of the Bavarian coalition party of Mrs. Merkel. The “coup” was postponed, but the price for Seehofer to keep his position ahead of coalition talks in Berlin was a tougher course on immigration.
Some say politics as usual, but there is a problem. The CSU faces elections in Bavaria next Fall 2018 – they lost so many voters to the AfD in 2017, on this course CSU leaders acknowledge their party may be “decimated” by the AfD next year. It may well be the end of the CSU as a political force in Germany as it has failed to grow outside of Bavaria. Yet this is not the core of Germany’s political crisis.
Most political analysts seem to be overwhelmed by or in denial of what is going on in Germany. The reason is not that all this is unfolding suddenly, rather the opposite. Most international analysts know much more about the British, French and EU political process than the German one. They can’t be blamed. Post-war Germany developed an excessive tradition to show to the outside world an image that is always a bedrock of stability, peace and continuity. Add to it the powerful dominance of state TV & radio at federal and state levels, it became boring.
To some extent the trauma of World War II still shapes Germany. Public behaviour and language are captive to the past. So much so, that German reporters and analysts struggle to directly address issues that do not fit with the culture they want to foster and the image they have portrayed to the rest of the world since the rule of chancellor Adenauer.
All of a sudden German politics is on fire, and for the first time in decades all the efforts of official Berlin and the powerful state media to preserve the “image” are not quite succeeding. In any other developed economy, the current crisis would lead to an open showdown. Simply, because all mainstream parties that Mrs. Merkel needs to form a coalition government could greatly benefit from letting Merkel fail to form a government. But Germany is different, unique actually. I feel the crisis itself will last only 2-3 months for two main reasons (see below), but the consequences may shape the future of the EU.
- There is a sense of collective duty to contain the AfD. Before mid December German political leaders are likely to put the “national duty” before their party interests – unthinkable in most other countries I follow, except Japan. The so called Schatten des zweiten Weltkriegs (shadow of WW2) is omnipresent and feeds from the fear that failure to unite Europe will lead to war. After the media painted the AfD as a monster, this will help all party leaders make a case for a united front against the AfD the common denominator.
- Germany is the only major industrialised economy that allowed its middle class to prosper over the past ten years. The German economic model benefitted greatly from China and globalisation, allowing German firms to raise salaries almost every year. Even retirees got a 5% income boost recently. That means, almost 2/3 of Germans are “economically” content-to-happy with the status quo and won’t necessarily risk a major shake-up. The problem is how to contain the unhappy and diverse 1/3 of Germans, many of whom are traditional conservatives, working poor and nationalists. Should the export machine slow down, this group could grow over the critical 40% quickly.
The problem is what will unfold from here until December.
Some key facts from the German elections: the AfD is not the real crisis
Last Sunday 25 Sep 2017 the ruling coalition of Mrs. Merkel lost almost 1 in 4 voters. Most parties lost voters to the AfD, which managed to win the support of some 6 million voters. Immediately, the SPD (Social democrats) announced they no longer want to be in a coalition with the CDU/CSU. But they meant Mrs. Merkel. No mainstream party wants to enter a coalition with Mrs. Merkel any longer. Every party that did that in the past 12 years was decimated by voters 2-4 years later. Merkel has a gentle appearance in public, but many political insiders fear her calculating & tough way of dealing with anyone who stands in her way. That has served her well in the past, but now no one wants to serve as a junior partner in her government.
Christian Takushi MA UZH, Macro Economist & Strategist, Switzerland – 28 Sep 2017
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