The results of the German election have shifted somewhat since last night's exit poll. What we know for sure is that a red-red-green coalition — between the centre-left SPD, far-left Die Linke and the Greens — is short of a majority, which is contrary to what every single opinion poll projected in the last few weeks
That is the single biggest news from the German elections. It deprives SPD leader Olaf Scholz of what he would have needed to force the free-market liberals of the FDP and Greens into a coalition, also known as the traffic light coalition. A coalition involving Die Linke could have been leveraged to sharpen minds, the threat of socialists and anti-capitalists having access to the chancellery. That threat is now gone and Scholz's negotiating position is weakened.
Yet Scholz was still the winner last night. It was the worst ever result for Merkel's centre-right CDU/CSU, but it beat expectations. Without the threat of red-red-green, we are down to only three feasible coalition options: two under Olaf Scholz and one under Armin Laschet.
One of these options, a grand coalition between the SPD and the CDU/CSU under Scholz, is not very likely. The chattering classes in Berlin love grand coalitions because it gives them maximal access to power. But after three grand coalitions in 16 years, this is clearly not the voters' favoured option.
This leaves us with two main options: a traffic light coalition under Scholz of the SPD, Greens and FDP — or a Jamaica coalition with the CDU/CSU, Greens and FDP, under Armin Laschet. Jamaica seems the more likely option because the CDU/CSU has more room for political manoeuvre. Laschet's lack of political positions is not great for winning elections but comes in handy now he's negotiating coalitions.
Robert Habeck and Christian Lindner, the chiefs of the Greens and FDP respectively, said they will talk to each other before they talk to anyone else. That’s a perfectly rational choice. The two are the kingmakers. They will be in any of the two most likely coalitions. If they unite, they can extract the maximum price. These upcoming coalition negotiations are an auction. The highest bidder will win.
These election results are about as good as could be expected for Laschet. It was a disastrous result for his party, but we knew that already. The 24.1 per cent will be just good enough for him to hang on. He will remain chairman of the CDU, for now at least, and lead the coalition talks with Greens and FDP. The fact that the SPD is ahead of CDU/CSU would matter for a grand coalition but is irrelevant to the other coalition talks. He will be chancellor if the CDU/CSU is the biggest partner.
The FDP has a stated preference for the CDU/CSU. A majority of the Greens have a preference for the SPD, but this is not true of everybody, especially not of co-leader Robert Habeck. The Green’s result was disappointing. At 14.8 per cent it was well below the polls. Within the Green leadership, the power is shifting back to Habeck. He supported the chancellor candidate Annalena Baerbock during the campaign but he is going to be the driving force in the coalition talks. He wants to become the finance minister — and he wants a half-trillion euro green investment programme. Laschet can give it to him.
Scholz's constraint is that he has to defend the SPD’s promise of a costly rise in the minimum wage and pension guarantees that will drain the federal budget. The SPD wants to fund this through tax increases, which is a red line for the FDP. The Green spending proposals on the environment and digital infrastructure are bigger in size but politically less problematic for two reasons. First, most people would agree that they constitute sensible investments — and, second, they can be shoved off-budget. Germany could create a special purpose vehicle, a state-owned entity that borrows funds for investment. This would raise Germany’s debt, but would not matter for either the domestic or EU fiscal rules. It is easier for Laschet to accommodate the Greens' demands than for Scholz to square the red lines of the SPD and the FDP.
Obviously events will intrude. Maybe a groundswell of opinion will persuade the Greens to shift to the left. But then, both Baerbock and Habeck have prepared the party for a Jamaica coalition with Laschet (even if most members prefer the SPD). This election was a humbling experience for the Greens, who at one point were dreaming about a chancellor Baerbock. Now Habeck, who gave Baerbock a free run at the chancellorship, is going to be in a very strong position. What he needs to do is set out demands and explain to his party whether these demands are more likely to be met by Scholz or Laschet. If this is a pure auction, Laschet has the advantage. But the CDU might try to get rid of him, the Greens may revolt against Habeck or something else could intrude. Jamaica is far from inevitable. But marginally more likely.
The AfD will not play any role in the governing coalition directly, but there is an indirect effect that could soon become important. The party only scored 10.5 per cent nationwide, close to what the polls predicted. These results hide strong regional variations. In Saxony, the AfD is now for the first time the largest party. Many CDU MPs lost their mandates to AfD candidates. So both the AfD and Die Linke are the parties of the east. The CDU’s eastern losses are a growing problem. It may well shift the party to the right, but not immediately.
For as long as there is a stalemate, the current grand coalition under Angela Merkel will continue. Don't be surprised if Mutti Merkel is still in post for months to come.
This was first published in the EuroIntelligence morning briefing. For a trial subscription click here.