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Germany after the traffic light coalition: The quest for a strong and stable government
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Everyone wants a strong government. German business leaders are pushing for swift action, and EU leaders, who rely on German leadership, are eager for a stable and effective Germany. German President Frank-Walter Steinmeier calls for “stable majorities” and “a government that can act,” appealing for “reason and responsibility” and stressing the need to “avoid tactics and confrontation.”
Initially, all eyes are on the SPD and CDU. Yesterday’s meeting between Chancellor Olaf Scholz and Friedrich Merz, who is expected to become the next chancellor, was highly anticipated. “We’ll take a look at the laws you bring to parliament,” Merz replied, with one condition: “Don’t postpone the vote of confidence until January.”
Even if Scholz holds onto his position, the SPD seems ready to share power with the conservative and powerful CDU. According to Handelsblatt, an internal CDU document analyzing the collapse of the traffic light coalition reveals that the SPD has been planning for some time to remove the FDP and Christian Lindner from the government.
This brings us back to German business leaders and the German economy.
Saxony’s CDU premier, Michael Kretschmer, welcomes the early end of the traffic light coalition in Berlin. “If the traffic light coalition had continued for another ten months, the economic situation in the state would have worsened,” Kretschmer states.
The CDU leader warns that companies are moving away, and notes that local authorities are already facing a deficit of 15 billion euros. “Every day a new government is in formation is an opportunity and a gain for Germany,” he asserts.
In representing the desires of German capital, the CDU voices the concerns of the business community. Following the coalition’s collapse, economic leaders are pressing for new elections as soon as possible.
The business leaders demand ‘geopolitical action’: The U.S., Ukraine, Middle East… No time to waste
“Every day with this government is a lost day,” says Dirk Jandura, President of the Federation of German Foreign Trade (BGA), calling for new elections as soon as possible.
Christoph Ahlhaus, Federal Managing Director of the BVMW (German Association of Small and Medium-Sized Enterprises), echoes this urgency, stating that a vote of confidence in January is “too late” and that the current Chancellor “no longer inspires confidence.”
Prominent industry associations, including the German Association of the Automotive Industry (VDA), German Chemical Industry Association (VCI), and German Electrical and Electronic Manufacturers’ Association (ZVEI), also urge a speedy re-election.
VDA President Hildegard Müller highlights the pressing need for change, pointing to the wars in Ukraine and the Middle East, Donald Trump’s election victory, a new European Commission, unresolved trade issues with China, and Germany’s weakened position as an investment hub. According to Müller, these challenges demand a federal government with “maximum capacity for action and determination” as soon as possible.
Peter Adrian, President of the Association of German Chambers of Industry and Commerce (DIHK), adds that Germany’s economy requires an economic policy that promotes investment and growth. He therefore hopes for only a brief transitional period.
Tim-Oliver Müller, Managing Director of the Federation of the German Construction Industry, expresses hope that the crisis can be resolved by “all democratic parties assuming responsibility for state policy.”
Meanwhile, Marcel Fratzscher, President of the German Institute for Economic Research (DIW), asserts that the war in Ukraine demanded priority shifts and a radical course correction in economic and financial policy, which he believes the current government failed to undertake.
Business leaders are also voicing their impatience. Matthias Zachert, CEO of chemicals group Lanxess, tells Handelsblatt, “I can’t understand why the Chancellor doesn’t want to call new elections before March. The Chancellor must pave the way for new elections immediately. Every day is crucial. We can’t afford to stall until March.”
Reform expectations: Less bureaucracy, lower taxes, and a stronger energy transition
The Mittelstand—a term for companies regarded as the backbone of the German economy—is also voicing its demands. Often described as “like SMEs but not like SMEs”, these family-owned enterprises dominate global export markets in specific sectors and are essential to Germany’s economic success.
Paul Niederstein, chairman of Coatinc (Germany’s oldest family-owned business in galvanizing), supports a faster reorganization of the federal government. “I think new elections in March are too late. Scholz is not showing consistency by dragging his feet until March,” he argues.
Michael Otto, owner of the Otto Group retail company, stresses “speed” in forming a new government. Echoing sentiments similar to Trump’s, he states, “We need a government that can act very quickly,” advocating for elections before Trump potentially takes office.
Martin Herrenknecht, founder of the tunnel-boring machine manufacturer Herrenknecht, outlines key reform expectations: reduced bureaucracy, tax relief for low-wage workers, control over the expanding welfare state, regulated migration policies, digitalization, and investments in infrastructure and education.
Northern Europe calls for ‘strong German leadership’
Martin Herrenknecht, founder of Herrenknecht, also advocates for increased investment in defense. Viewing recent events in the US as a wake-up call for Europe, he emphasizes, “To protect our democracies against autocrats and despots, we must build up our own defense.” In Germany, the call for militarization of the economy and society is gaining momentum.
Across sectors, the push for less red tape is clear, with tax cuts for SMEs and reform high on the agenda. Business leaders are calling for strong, decisive leadership to address these pressing issues.
However, some express concerns about the state of the German workforce. Frank Natus, chairman of VTU in Trier, criticized Chancellor Scholz, stating that Germany faces high taxes, the highest energy costs in Europe, extensive bureaucracy, and a skilled labor shortage. “We have become too lazy, lethargic, and complacent in Germany, and that must change urgently,” Natus asserts.
Paul Niederstein, head of Coatinc, echoed similar concerns, remarking that high sickness rates reflect a workforce he described as “too spoiled and overconfident.”
EU leaders are watching these developments closely. At the recent European Political Community (EPC) summit in Budapest, Finnish Prime Minister Petteri Orpo expressed hope for speedy elections in Germany, stressing that Europe needs a strong German government. His Belgian, Swedish, and Danish counterparts—Alexander De Croo, Ulf Kristersson, and Mette Frederiksen—share this view.
Is an AfD policy possible without the AfD?
German business leaders seem to be calling for policies that resemble those of the Alternative for Germany (AfD). Ironically, the “spirit” of this party, once considered outside the mainstream, is now being invoked in economic discourse, with significant overlap in economic platforms.
It is often forgotten these days that the AfD was founded in 2013 by a group of ‘free market economists’ who were fundamentally critical of European integration, and angry at the EU’s bailout of Greece and other heavily indebted eurozone countries.
According to AfD deputy leader and budget committee spokesman Peter Böhringer(*), the party wants a ‘free market economy with a social perspective’, largely based on the 1948 model of Ludwig Erhard, the Christian Democrat politician who laid the foundations for Germany’s post-war reconstruction. The relationship between this economic policy, also known as ordoliberalism, Nazism and post-war federal Germany deserves a much longer analysis. But it recognises the limits of the ‘German miracle’: The AfD is committed to limiting the role of the state and advocates cutting taxes, including those that are seen as a ‘means of redistributing wealth’. Its anti-redistribution rhetoric about ‘the share of welfare that goes to immigrants’ also appeals to lower-income Germans and Germans with a migrant background.
Any state-run economy will sooner or later end up in misallocation and corruption,’ says the party’s economic programme, which advocates cutting state subsidies and abolishing the tax cap, as well as wealth and inheritance taxes.
Companies would make a profit and there would be enough money to help the poor: This is the cornerstone of the AfD’s ‘social market economy’.
However, the AfD does not yet have an ‘industrial policy’. More precisely, it still turns up its nose at the partnership between the state and the private sector for re-industrialisation that is now being widely discussed in the West. It therefore polls well in eastern Germany, where the need for an ‘energy turnaround’ is high.
But it is clear that the march to ‘power’ will not be both this and that, or neither this nor that. The Germany of exporters needs a strong, ‘less bureaucratic’ government, but at the same time a debt-free and ‘re-industrialised’ Germany. If the CDU-SPD ‘grand coalition’ does not work, an AfD-ised CDU or a CDU-ised AfD is the perfect solution. It is not soothsaying to expect a ‘recalibration’ of the two parties in the coming year.
(*) Peter Böhringer is a member of the libertarian Friedrich August von Hayek Foundation. In every party of the global ‘populist’ wave, without exception, you can find traces of libertarian organisations and ideas that say ‘this is not real capitalism’.

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The German Federal Parliament (Bundestag) has passed a bill proposing an amendment to the constitutional debt brake to pave the way for armament.
In the vote requiring a two-thirds majority, 512 members of parliament voted in favor, while 207 opposed, with no abstentions.
The amendment was made possible after the CDU/CSU and SPD brought the bill to parliament, and the Greens also approved it. If the vote had been held with the Bundestag composition from the early elections on February 23, the amendment would not have passed due to likely objections from AfD and Die Linke.
Now, the Federal Council (Bundesrat) will also need to approve the amendment on Friday. A two-thirds majority is also required in the state parliaments. The states where CDU/CSU, SPD, and the Greens are in government together hold 41 of the 69 votes in the Bundesrat.
However, Free Voters leader Hubert Aiwanger has already given up opposing new borrowing, so Bavaria will vote in favor of the Federal Constitutional amendments on Friday. Thus, the majority will be secured.
During the discussion of the bill, Johannes Fechter of the SPD defended the urgency to make the amendment, arguing that quick decisions are now necessary due to the “situation in the world.”
Fechter claimed that the new Federal Parliament could only take action “in a few months” and emphasized that the members of parliament had enough time to discuss the constitutional amendment.
Fechter accused those who criticized the plan of being “extensions of Putin.”
AfD parliamentary group secretary Bernd Baumann made harsh criticisms in his speech and said that the CDU/CSU prevented experts from being heard in the budget commission.
Baumann accused Federal Parliament President Bärbel Bas of the SPD of deliberately delaying the gathering of the new Federal Parliament and accused CDU leader Merz of wanting to buy power with new debts, “as in banana republics.”
The AfD member, arguing that the CDU/CSU had retreated from all election promises, said that the votes were rigged and the voters were deceived.
CDU/CSU parliamentary leader Thorsten Frei insisted that everything was “legal,” arguing that the old Federal Parliament composition was “fully capable of taking action.”
Greens representative Irene Mihalic emphasized that they were not in favor of the quick decision-making procedure in the old Federal Parliament, while accusing the AfD of “using procedural rules to divide the parliament” and argued that it was important for “democracy to remain resistant to the AfD.”
Christian Görke from the Left Party (Die Linke) spoke of a situation that was “unworthy of parliamentary procedure.” Görke said that it was a scandal for the Federal Parliament to make such decisions and argued that all of this was “disrespectful to the state.” The Left Party, directing harsh criticism at the Greens, claimed that “they allowed themselves to be bought for a few billion euros.”
Speaking on behalf of BSW, Jessica Tatti announced that she would vote in favor of the AfD’s motion to remove mass debts from the agenda. While BSW did not submit its own motion, Tatti accused the Left Party of refusing to quickly convene the new Federal Parliament session with the AfD to block the constitutional amendment.
After procedural discussions, the speeches of the “heavyweights” began. SPD leader Lars Klingbeil was the first speaker, mentioning a “historic decision that could show a new direction to the country.”
Claiming that peace in Europe was once again in danger, Klingbeil emphasized that Germany stood by Ukraine.
However, pointing out that the situation had recently deteriorated significantly, the SPD leader said that Germany now had to do its “homework” and stated, “We will do everything we can to protect peace.”
Arguing that the debt brake had made management very difficult in recent years, Klingbeil said that there was now a “historic compromise” to solve this problem.
Klingbeil emphasized that it was a correct signal to show that the “democratic center” could take action, while pointing out that the bill was the largest financial package in the history of the Federal Republic.
“These investments will make our country stronger,” said the SPD leader, suggesting that the majority of Germans would be relieved by the debt package.
Later, CDU leader Friedrich Merz emphasized that there were no “new national goals” in the Federal Parliament: Natural resources have already been protected in the Constitution for 30 years, including “climate neutrality.”
Showing the war in Ukraine as the reason for easing the debt brake, Merz argued that this was also a war against Germany, emphasizing that he would always defend himself against attacks on the “open society.”
Merz emphasized that he wanted to supply the German Armed Forces (Bundeswehr) with numerous “modern systems” and obtain them from the EU as much as possible, while describing joint borrowing as the “first step” towards a European defense community. The CDU leader also defended “private assets” for infrastructure.
Saying that he wanted “the reduction of bureaucracy” and a state that could move, Merz argued that this would be a good justification for new debts and announced that he would vote in favor of the constitutional amendments today with a “clear conscience.”
Speaking on behalf of the Greens, Britta Haßelmann attacked the Left Party, saying that they did not face the realities in Europe. “Stop slandering the Greens at this point,” said Haßelmann, claiming that the Greens “could not be bought.”
Claiming that the Left Party now had to explain to the citizens “why they were against civil defense,” Haßelmann also addressed Merz directly, saying that “democratic parties” had to regain the public’s trust.
On behalf of the AfD, party and parliamentary group leader Tino Chrupalla spoke. He pointed out that the CDU/CSU and the traffic light coalition had agreed to allow the old Federal Parliament to make important decisions for months.
Pointing out that they were now using the old majorities because they did not have a majority in the new Federal Parliament, Chrupalla said, “What a great show they are putting on for us here.”
Arguing that voters felt betrayed by Merz, the AfD leader said that the CDU leader was only interested in the chancellorship, shouting, “You have no backbone.”
Chrupalla stated that the “special fund” instrument was misused without a need being identified.
Taking the floor, SPD Defense Minister Boris Pistorius argued that advancing German defense was “the order of the day.” Pistorius referred to the changing threat situation due to the war in Ukraine and the US’s focus on the Indo-Pacific region and said, “Our responsibility is increasing, and the burden we have to bear as Europeans is also increasing.”
Saying that Germans would have to play a central role in this regard, the minister said, “This means more soldiers, more equipment, faster operational readiness. In short, the financial needs for this will increase significantly.”
Arguing that this was “about the safety of our children and grandchildren,” Pistorius claimed, “The threat situation comes before the cash situation.”
AfD honorary chairman Alexander Gauland also took the floor and made “a few personal statements.” Reminding that he had previously been involved in politics in the CDU and had been in the same party with Merz for a long time, Gauland argued that the current CDU leader was “a victim of Merkel’s desire for power.”
Noting that he hoped that Germany would have a center-right policy with Merz’s leadership, Gaulan argued that instead, Merz had sacrificed “everything that was still conservative or bourgeois [bürgerlich]” in the CDU.
Predicting that Merz would fail just like the traffic light government, the AfD member said that the likely chancellor only had “yesterday’s answers for tomorrow’s problems.”
Arguing that a real turning point could only be experienced with the AfD, Gaulan said, “As of this week, the Merz CDU is a continuation of the Merkel CDU.”
AfD politician Michael Espendiller said, “The defense budget should also be financed from the normal budget.”
Arguing that the problem was not money but the waste of money, Espendiller reminded that the protection of Bundeswehr barracks only by private security services costs billions of dollars a year and stated that defense projects regularly cost much more than expected.
According to the AfD member, there is a “mentality” in the defense sector as it was 50 years ago, and Germany does not have a revenue problem but a spending problem.
BSW leader Sahra Wagenknecht criticized “climate-labeled war loans,” comparing the ‘CO2 footprint’ of tanks and small cars.
Accusing Merz of pursuing a policy that brings the AfD even closer to an absolute majority because he does not want to talk to the AfD, Wagenknecht accused the CDU leader of “adding fuel to the fire” in the Ukraine war.
Arguing that Germany was now on the way to becoming an “economic dwarf,” the BSW leader complained about “systematic counting errors” against her party in the Federal Parliament elections and argued that if a recount was not carried out, the parliament would lack democratic legitimacy.
At the end of Wagenknecht’s speech, BSW deputies unfurled banners. The banners read, “Not 1914, 2024. NO to war loans.”

The “International Conference on Combating Antisemitism”, organized by Israeli Diaspora Affairs Minister Amichai Chikli in Jerusalem on March 26-27, has sparked controversy in Europe.
Chikli, who has previously fostered relationships between Israel and his Likud party with some controversial figures, has invited individuals such as Jordan Bardella, president of the French National Rally (RN) party; Marion Marechal, a French Member of the European Parliament formerly associated with RN and Reconquête!; Charlie Weimers, a Member of the European Parliament from the Sweden Democrats party; Milorad Dodik, president of the Republika Srpska in Bosnia and Herzegovina; and Hermann Tertsch, a Member of the European Parliament from the Spanish right-wing Vox party.
Following the leak of the guest list to the press, several prominent figures expected to attend from Europe announced their withdrawal. These included the Chief Rabbi of Britain, Sir Ephraim Mirvis; British politician and antisemitism advisor Lord John Mann; Goldsmiths University professor David Hirsh; French “philosopher” Bernard-Henri Levy; and the German antisemitism commissioner, Felix Klein.
Mann told The Jewish News, “The quality of some of the dissenting politicians speaking is not high enough to make me drop competing priorities.”
Hirsh made a similar statement, saying, “The UK has nothing to learn about fighting antisemitism from these characters. The agenda includes a number of far-right speakers who associate themselves with anti-democratic and anti-equality movements.”
Hirsh argued that “anti-democratic thought is fertile ground for antisemitism” and that the best way to undermine antisemitism is to “support democratic thought, movements, and states.”
Levy, a staunch defender of Israel, was scheduled to be a keynote speaker at the event. However, the French figure told Le Monde that he had informed Israeli President Isaac Herzog that he would not attend due to the “far-right” guests.
Germany’s antisemitism commissioner, Felix Klein, told Haaretz that he was unaware of the guest list when he confirmed his participation and canceled after seeing who would be speaking at the event.
Volker Beck, a former member of the Federal Assembly, also announced his non-attendance, stating on X, “If we associate ourselves with far-right forces, we discredit our common cause; this also contradicts my personal beliefs and will negatively impact our fight against antisemitism in our societies.”
European Jewish Congress (EJC) President Dr. Ariel Muzicant also sharply criticized Chikli on Tuesday. In a letter sent to The Jerusalem Post, Muzicant said, “For 80 years, we have been fighting antisemitism, Holocaust denial, and the aftermath of the Shoah.”
Muzicant pointed out that far-right parties in Europe are the biggest opponents in this fight, stating, “Many officials and leaders of these parties have supported Holocaust denial, promoted antisemitic codes and expressions, and fought against anti-Nazi laws.”
Muzicant wrote that although some far-right politicians now claim to support Israel, “The motivation of far-right politicians to come to this conference is not love for Israel or protecting Jews, but mainly to get a kosher certificate. And we, Jews or Israelis, should not be used as a kosher certificate.”
The EJC President described the conference organized by Chikli as a major problem for Jewish communities in Europe, arguing that it harms Jewish existence in the diaspora, “as if members of the Israeli government are stabbing them in the back.”
Muzicant emphasized that far-right movements in Europe often oppose liberal democracy, the rule of law, human rights, and freedom of the press.
Knesset Aliyah [the name given to Jewish immigration to Palestine] and Integration Committee Chairman Gilad Kariv (Democrats) called on Monday for the government to abandon the practice of inviting politicians from parties with what he described as “definite antisemitic roots.”
In a letter to Prime Minister Benjamin Netanyahu and Foreign Minister Gideon Sa’ar, Kariv wrote that the invitation “constitutes a deviation from the long-standing policy of Israeli governments and the Ministry of Foreign Affairs and directly contradicts the positions and policies of the representative organizations of Jewish communities in these countries and on the international stage.”
Kariv claimed, “The invitation of these representatives is particularly shocking, considering that it concerns an international conference on combating antisemitism, which is supposed to be held under the auspices of the president and the prime minister.”
Kariv argued that “inviting representatives of extremist parties with antisemitic roots undermines the foundations of Israel, the Jewish people, and the international fight against antisemitism,” adding, “It damages the fabric of relations between the State of Israel and Jewish communities in the diaspora and may harm Israel’s strategic relations with Western allies and leading political parties.”
Kariv added, “This step weakens Israel’s leading role in the global fight against antisemitism and represents a disturbing and dangerous regression to the current and future challenges of the Jewish people, as well as many Jewish communities around the world.”
Kariv argued that even though these parties express support for Israel, they should still not be given “an international stamp of approval.”
Chikli’s open support for the European “far-right” is receiving condemnation from European countries.
In December, Romania’s Ambassador to Israel condemned Chikli for holding a phone call with presidential candidate Calin Georgescu, who praised Romanian leaders who condoned the deaths of 280,000 Jews during the Holocaust.
French President Emmanuel Macron also complained to Prime Minister Netanyahu about Chikli after he openly supported Marine Le Pen’s presidential candidacy from the National Rally in the recent elections.
In recent weeks, Chikli also attended the “Make Europe Great Again” conference in Madrid, led by the Spanish Vox party.
Chikli’s party, Likud, also joined the Conservative Political Action Committee’s (CPAC) recent meeting as an “observer member,” one of the most important platforms of the national conservative movement in the West.

Germany’s likely next conservative chancellor, Friedrich Merz, said budget cuts should be discussed during coalition talks with the Social Democrats. This statement came after the announcement of a historic armament and infrastructure spending package.
Merz, of the CDU, said the next German government would have to cut costs despite the proposed 500-billion-euro debt-financed fiscal package.
“We will have to reduce costs at the federal level, at the state level, and in local communities. The margins have not become larger,” Merz told German public broadcaster ARD.
The landmark fiscal package also includes easing Germany’s constitutional debt brake on borrowing.
The spending plan is also supported by the Social Democratic Party (SPD), which is continuing coalition government talks with the CDU/CSU after last month’s early election.
The package includes investments in defense and infrastructure. The package requires a two-thirds majority in Germany’s lower house, the Bundestag, and upper house, the Bundesrat, to pass. The package has already been approved by the Federal Assembly Budget Committee.
The Greens, who initially opposed the package, are expected to vote in favor of it because 100 billion euros have been allocated to combat climate change. Merz hopes the constitutional amendments will be adopted before the new Federal Assembly takes office on March 25.
Some members of the Federal Assembly are planning to apply to the Federal Constitutional Court in Karlsruhe to block the vote on the multi-billion-euro fiscal package scheduled for Tuesday.
Independent member Joana Cotar has filed a lawsuit with the Karlsruhe court for the second time, demanding that the vote be postponed. The Constitutional Court confirmed on Sunday that the case had been accepted.
Three members of the Federal Assembly from the business-oriented Free Democratic Party (FDP) also said they would file an emergency application with the court, arguing that there was not enough time to publicly discuss the package’s impact on society.
According to FDP financial expert Florian Toncar, the current German government, consisting of the SPD and the Greens, has failed to answer “very simple and basic questions” regarding the package.
On the other hand, Merz also said that coalition negotiations with the SPD would involve “very difficult conversations” about much-needed reforms and what he described as “possible savings in the federal budget.” Merz argued that they would have to save money.
Referring to when Germany’s new coalition should be formed, Merz said it was too early to say and added, “We have not reached the end of the discussion. We have not yet reached the point of setting a date [for the new government].”
Merz wants to be chancellor before Easter in mid-April, about 50 days after the early election.

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