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’.