A Political And Economic "Doom Loop" Is Underway In Germany

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by Tyler Durden
Thursday, Jun 15, 2023 - 07:30 AM

Authored by Mike Shedlock via,

Germany has massive deindustrialization problems on which it is in denial. Add a political doom loop to the mix...

Alternative for Germany

Lead chart adapted from Wikipedia German Federal Election Polls.

Support for Alternative for Germany, AfD, a right-wing political party is on the rise, primarily at the expense of the Green Party. 

In September 2012, Alexander Gauland, Bernd Lucke, and journalist Konrad Adam founded the political group Electoral Alternative 2013 in Bad Nauheim, to oppose German federal policies concerning the eurozone crisis, and to confront German-supported bailouts for poorer southern European countries.

Their manifesto was endorsed by several economists, journalists, and business leaders, and stated that the eurozone had proven to be "unsuitable" as a currency area and that southern European states were "sinking into poverty under the competitive pressure of the euro".

Since 2015, AfD's ideology has been characterized by Islamophobia, anti-immigration, German nationalism, national-conservative, and Euroscepticism. The AfD is the only party represented in the German Bundestag whose environmental and climate policy is based on the denial of human-caused climate change.

All the traditional parties want nothing to do with AfD in any government coalition. But above the 20 percent mark, avoidance of AfD becomes more than a bit difficult. 

Political Reality of AfD at 20

Eurointelligence comments on the political realities of AfD at 20, emphasis mine.

The first German opinion poll ratings have the AfD at 20%, an important threshold. This is from YouGov, a rank outsider in the German polling landscape. Insa, which has a tendency to over-register voter movements, has them at a statistically indistinguishable 19.5%. The AfD is on a roll right now.

We totally agree with the analysis of Jasper von Altenbockum in FAZ. By huddling in the political centre and forming grand coalitions, the traditional parties have lost their political profile, and opened a huge gap in the ideological landscape. A doom loop is at work. As the AfD strengthens, it will get increasingly difficult for the CDU or the SPD to form governments, except for grand coalitions. Unless the CDU/CSU changes its position to allow coalitions with the AfD, Germany is headed towards another long period of grand coalitions.

A story that caused an uproar in Germany yesterday was the results of a regional election. Germany has a four-tiered federal system: federal, states, regional and local. This vote took place at the third level of those tiers. An AfD candidate almost got elected in the first round of an election for the leadership of a regional council in the east German state of Thuringia, an AfD stronghold. They scored just under 50% in the first round. For the second round, all the other parties have now agreed what Altenbockum has called a people's front against the AfD. They support the CDU candidate, who came second.

It will be interesting to see whether this super-grand-coalition idea works. We don't think this is a sane strategy. What we expect to see is that the AfD is en route to becoming a firmament of the German political scene just as Maga Republicans are in the US. There is simply a sizeable minority of people who are not sold on green policies, or on support for Ukraine.

Olaf Scholz and SPD have now clearly positioned themselves on Ukraine's side. That is a change in policy. But the issue continues to divide people. The AfD is also capitalizing on the fact that around one third of Germans do not agree with these policies. There is significant potential for the AfD, and in proportional representation-based systems, you don't need to win outright majorities to govern. The AfD is now starting to breach important thresholds. 

Current Polls 

  • Union (CDU/CSU) Angela Merkel's party: 29%

  • AfD: 19%

  • SPD: 18%

  • Greens: 14%

  • FDP: 7%

In an election, any totals below a 5% threshold do not participate in Parliament. FDP is on the cusp.

Traffic Light Coalition

The current coalition is a super-grand coalition of SPD, the Greens, and FDP. This is dubbed the Ampelkoalition, "Traffic Light Coalition", based off colors of the party flags.

Project Syndicate notes Mixed Signals from Germany’s Traffic-Light Coalition

The urgent need for reforms, combined with the imperative to respond quickly to new geopolitical realities, has overloaded an already fragile coalition in which three quasi-chancellors – Habeck, Lindner, and Baerbock – operate alongside Scholz. Collectively, they give the impression of an unmoored government with too many veto players catering to their constituencies.

Ministers are going in different directions and increasingly facing off, heightening the likelihood of policy failures. Plans to establish a German National Security Council were dropped, for example, because of political deadlock: the chancellery and the foreign ministry could not agree on where the Council would be located and who would be responsible for its governance.

The next German federal election is only two years away, and a resurgent Christian Democratic Union, the largest opposition party, is polling at 30%, whereas the SPD – the leading partner in the coalition government – is at 18%, down significantly from the 26% of the vote it received in the 2021 election. Based on current polling, the Ampelkoalition would not win a majority.

Super-Grand Coalition Math

It's difficult to build a two-way grand coalition 50+% majority if you rule out AfD. And if support for AfD rises to 30% it would become impossible. 

In a new super-grand coalition, AfD would become the largest opposition party with special parliamentary privileges. No one wants that. 

Given that Greens have little in common with CDU, the Greens might prefer to be the opposition party. But in many scenarios, that would only be possible if AfD was directly part of a grand, or super grand coalition.

This is the political doom loop that Eurointelligence discusses. But what about the real economy?

The Deindustrialization of Germany Will Cripple the EU for a Long Time

Yesterday, I noted The Deindustrialization of Germany Will Cripple the EU for a Long Time

The EU lags the US in AI, and in technology in general. The EU is fearful of AI and wants to rein it in.

What does Germany have other than an aging population, aging infrastructure, SAP software, and diesel technology it is desperate to protect.

The EU defines recession differently than the US. The EU goes by the adage of two consecutive quarters of declining GDP. By that measure the EU is in recession now.

Radical parties do well in these environments and AfD has a lot to moan about with the Greens forcing the abandonment of nucleal power only to replace it with more coal.

A political and economic doom loop is in play for Germany. And Germany will drag the rest of the EU along, not that the rest of the EU needs any help.