Dear readers,
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I am writing from Berlin on the first of three stops in Europe — Paris and Geneva will follow — meeting clients as well as journalists, policymakers and diplomats to get a better sense of European politics. We will, of course, be sharing insights with you in our daily briefings but I wanted to take a moment to highlight three themes that have struck me about the state of Germany since my last visit one year ago.
Much more than a year ago, German politics today is defined by serious – and potentially irreconcilable – tensions between the coalition parties. The coalition, composed of the Social Democrats, the Greens and the Free Democrats, was always an awkward and uncomfortable match. But it started well enough (witness the unusually realpolitisch Greens foreign minister on China and Russia), becoming surprisingly unified over shared priorities, including the energy transition, defence spending and support for Ukraine.
Now, however, the wheels have come off. Germany’s constitutional “debt brake,” which limits fiscal spending as a proportion of GDP, is forcing the coalition to make tough decisions on the budget, exposing some fundamental differences in each group’s economic philosophies. In essence, the Free Democrats want to plug the budget gap through cuts to social programs but the Social Democrats and the Greens are strongly opposed. If they cannot agree on a compromise by 14 November, the date set for parliamentary budget negotiations, the coalition may not hold.
Secondly, coalition fractures over the budget are taking place against the backdrop of eroding public support for all three parties and rising popularity of the far-right Alternative for Germany (as well as the far-left but socially conservative Sahra Wagenknecht Alliance). Over the past year, the government’s approval rating has steadily declined (the Social Democrats polling at 15%, the Greens at 11% and the Free Democrats at 4%). And like in many industrialised Western nations, incumbency is proving difficult.
Rising cost of living pressures, growing disillusionment with the political establishment, and concerns over migration have not only made governing challenging – they have also increased the popularity of the anti-establishment far-right, now polling at an unprecedented 18%. While the prospects of the far-right taking power remain slim come next September’s elections – no party wants to align with them and they have not moderated to the same extent as, say Marine Le Pen’s party in France – the political centre in Germany is definitely shifting right.
A third, and related, observation is that public sentiment towards the Ukraine war has demonstrably shifted. While Chancellor Olaf Scholz remains committed to supporting Ukraine, public discourse now places more emphasis on diplomacy and peace negotiations. While official rhetoric still supports Ukraine’s autonomy in decision-making, the combination of fiscal constraints, public fatigue and growing caution with the Social Democrats and the Greens, suggests that Germany’s posture on Ukraine may increasingly favour a negotiated settlement – a view that would align not only with Donald Trump’s but also similar growing sentiments in France.
If you’d like to deepen your understanding of these shifts, our senior advisors — Peter Tesch, former Ambassador to Germany and Russia, and Justin Brown, former Ambassador to the EU and NATO — are exceptionally well-positioned to provide perspective on Germany’s complex role within Europe, its foreign policy, and the delicate balance with Russia.
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