The recent good performance of right-wing and left-wing populists in East Germany's provincial elections is on track to shake the foundations of Europe's leading economy. After winning the majority of the vote in Thuringia, ahead of the Christian Democratic Union (CDU) and coming second in Saxony with 30.6 percent of the vote to the CDU's 31.9 percent, the far-right party "Alternative for Germany" became a major force in the former GDR. This further complicated the political situation for the coalition of Social Democrats, Liberals and Greens led by Chancellor Olaf Scholz, which governs Germany at the federal level. The results of the elections, which awarded third place to the anti-immigration and far-left Union "Sarah Wagenknecht" in both regions, are causing concern among experts and analysts about the possible social and economic consequences.
"The results of the regional elections have made it impossible for the governments in Saxony and Thuringia to continue to exist in their current configuration. It will be difficult for the centrist parties to form a coalition, given that they rule out a coalition with the "Alternative for Germany" and any majority in the regional parliaments will de facto depend on the participation of the newly created "Sarah Wagenknecht" Union. His anti-NATO stance and desire to end the war in Ukraine immediately, no matter what, put him at odds with most major political parties, Julian Zimmerman and Elena Klare, analysts for the government-private center at Scope Ratings, warned in a recent report. (Scope Ratings).
The election result comes in the context of strengthening the positions of ultra-nationalist parties in both the French and European elections. For Germany, it is particularly telling that these victories come in East Germany, a region where unemployment reached 7.6 percent in August and is 1.5 percent above the national average, according to the Federal Statistical Office "Destatis" (Destatis). "In East Germany, the sense of despair and stagnation combined with the economic "hangover" of German reunification, makes it easier for anti-establishment candidates to consolidate power and spread a message similar to that directed at voters in rural areas in the US," explains Rachel Rizzo, a researcher at the Atlantic Council.
In a recent analysis, Rizzo notes that the strengthening of radical blocs is due to deep distrust in the EU, opposition to support for Ukraine, rejection of climate change policies and a general feeling that things are going badly because "elites" ; have failed. It should not be forgotten that for the first time an ultra-nationalist faction won an election in Germany after the Second World War, notes the Spanish publication "Cinco Dias".
In a recently published analysis, Viola Neu, head of social and electoral research at the Konrad Adenauer Foundation, argued that support for conservative Michael Kretschmer allowed the Christian Democrats to prevail in Saxony. However, the expert specifies that "the main parameters of the political mood are almost identical to the pessimistic mood in Thuringia".
Economic crisis
The industrial heart of Europe cannot recover from the pandemic and the price spike that followed the outbreak of the war in Ukraine. The latest data on the German economy in the second quarter of 2024 showed that it shrank by 0.1 percent after expanding by 0.2 percent between January and March.
In this context, the researchers of the English think tank "Ompif" (Omfif) believe that these election results are a response to the social threat to the stability of the German economy after the end of the pandemic, especially in the economically weaker provinces of the former GDR.
"Germany's economy has been thriving for a long time, reflecting the country's policy of stability, the ability to produce high-quality goods, especially cars, and export-driven growth. This long-standing successful model is now largely destroyed," say the think tank's researchers.
Is there a risk?
HSBC experts, however, believe that the victory of the radical formations does not pose an immediate risk.
Berenberg bank analysts view the situation in a similar way, according to which these results do not "redistribute access to important areas of macroeconomic policy", as regional competences are concentrated in security and education, but not in other sectors of great importance for the national economy.
"We don't expect these local elections to collapse the federal government or change Germany's already weak economy, as Saxony's 4.1 million and Thuringia's 2.1 million make up a relatively small fraction of the 84.7 million people who live in Germany, and they are also located in the eastern part of the country, which is economically weaker, according to Berenberg.
According to Carsten Brzeski, head of macroeconomic research at ING (ING), one possible way for Chancellor Scholz's coalition to regain lost political capital lies in expansionary fiscal policy and stimulus packages .