The recent federal elections held on February 23, 2025, showcased significant political shifts within Germany, as the conservative coalition of the Christian Democratic Union (CDU) and Christian Social Union (CSU) emerged victorious, reclaiming the first-party status with 28.5% of the vote. This success has opened the doors for potential coalition talks with the Social Democratic Party (SPD), which received only 16.4% of the votes, marking its lowest support level to date.
The elections were particularly notable due to the rise of the far-right Alternative for Germany (AfD), which saw its support nearly double to 20.8%, making it the second-largest party. Analysts view this result as indicative of growing public sentiment surrounding immigration and economic concerns, reflecting similar trends seen across Europe.
“We need to act now. The issues are well-known, and we need to implement solutions immediately,” stated Roland Busch, CEO of Siemens, underscoring the urgency felt among Germany’s corporate leaders. The economy—burdened by high costs, bureaucratic hurdles, and intense international competition—has supporters of the CDU/CSU advocating for swift action to avoid wasting time on prolonged discussions.
Christian Sewing, CEO of Deutsche Bank, expressed similar sentiments, emphasizing, “Germany needs a government with the ability and will to act quickly.” This call for immediate reform signifies the pressures the newly empowered CDU/CSU may face as they navigate coalition negotiations.
Merz, the leader of CDU/CSU, has openly declared his intention to form what he described as a "red-black coalition"—a reference to the SPD's red colors juxtaposed against the CDU/CSU's black. Given the combined seats of 328, which surpass the 316 needed for a majority, coalition discussions are expected to commence soon, with the hope of establishing the new government by April.
Despite the potential benefits of this alliance for economic recovery, the path is fraught with challenges. Policy disagreements loom large between CDU/CSU’s calls for tax reduction and deregulation, and SPD’s advocacy for welfare expansion and infrastructure investment. The economic difficulties—heightened by high energy prices and the impacts of the Ukraine conflict—coupled with increased public anxiety over immigration suggest any coalition may need to tread carefully to balance varied voter expectations.
Voter interest was markedly high, with turnout reaching over 82%, the highest since German reunification, illustrating the heightened stakes this election presented. This engagement reflects voters' unprecedented concern about how the next government will address pressing issues such as economic stability and immigration reform.
ITB and political commentators suggest the looming threat of the AfD could potentially influence the coalition's strategies moving forward, as their positioning may compel mainstream parties to adjust their platforms to regain public trust.
Underpinning these developments, business leaders have made it clear: for economic revitalization, urgent reform is necessary. The emphasis on regulation reduction and market-driven approaches will be pivotal as Germany looks to rebound from its current economic stagnation. CEO Miguel Lopez of Thyssenkrupp remarked, “Germany needs to become attractive to investors again to tap new growth potentials.”
The internal dynamics of coalition talks will also see left-wing parties like The Left and the AfD maintaining over one-third of the seats, effectively making them key players capable of blocking constitutional amendments, particularly concerning fiscal regulations. The debt brake, rooted deeply within Germany’s fiscal policy, may face scrutiny and debate, especially as economic recovery funding plans come to light.
With economic forecasts predicting challenging growth conditions, the need for innovative approaches to fiscal policy will remain front and center. Both CDU/CSU and SPD will have to carefully navigate their coalition's priorities, keeping public welfare and economic resilience at the forefront of their discussions.
The political climate remains volatile as leaders from various parties prepare for negotiations, and the role of the AfD could shift dramatically from radical opposition to influential committee members. This reality necessitates careful calibration of policy positions as the new government shapes its agenda.
Public sentiment indicates widespread discontent with the status quo, particularly among voters who feel left vulnerable to the difficulties presented by immigration and economic instability. Such pressures will likely demand accountability and action from the new coalition as they commence their term, reaffirming the need for tangible results and positive change.
The upcoming months will be pivotal as the CDU/CSU navigates these coalition negotiations, balancing their traditional stances against growing public dissatisfaction. The ability to form a stable and responsive government could define not only the political future of Germany but also provide insights for broader European trends, especially as nations grapple with similar challenges.