Five takeaways from the German election

The great Italian writer Umberto Eco — shrewdly understanding his continental neighbor — put it well in saying, “No German knows what he actually wants to say.” This adage held true in the just-concluded German election, wherein no party attained even 30 percent of the vote, while five parties managed more than 10 percent.

The center-left Social Democrats, led by their reassuring chancellor candidate Olaf Scholz, “won” the election with 26 percent of the tally, an improvement of five points over the prior election of four years ago. The center-right Christian Democratic Union-Christian Social Union alliance came next with 24 percent, the worst result in its history, fully nine points lower than last time. The chastened Greens were third with 15 percent of the vote, with the pro-business Free Democrats coming fourth with 11.5 percent of the total. Finally, the beyond-the-pale, far right AfD managed 10 percent.

In terms of parliamentary seats, the SPD has 206, the CDU-CSU 196, the Greens 118, the FDP 92, and the AfD 83. What all these numbers amount to is nothing less than an electoral car crash, with no clear winner remotely discernible. What, then, can we make of this electoral scrum?

First, as noted in earlier columns (and I am delighted to have called the election perfectly), in political risk terms three is the magic number. The fragmentation of German politics means that, for the first time in 70 years, it will take three political groups, not two, to form a German government, the electoral math being what it is. As I wrote last month, I could not get three friends to agree on an ice cream flavor, let alone attain consensus over the complexities of matters of state. Germany, already a policy-lite zone under outgoing Chancellor Angela Merkel, will reach decisions glacially, at the level of lowest common denominator, merely because of the complexity of three-way governance.

Second, this built-in stasis has massive repercussions beyond Germany, dooming the EU to more years of drift and decline. As the long tenure of Merkel proves, there is a time in history for merely managing crises, when keeping the ship afloat is the only major strategic goal. However, the problem with this tactics-only approach is that unsolved policy problems have a way of turning septic. This is the reality Europe presently finds itself in: Economically sclerotic, strategically (apart from France) impotent and politically divided over almost every foreign policy question, particularly the vital point of whether to join the US in balancing against an increasingly aggressive China.

Answers are now needed; solutions are now necessary. Positive policy outputs at the European level are almost impossible without German leadership, as the economic motor of the continent. With Germany politically in a logjam, this becomes simply impossible. Over the pivotal point of what to do about China, look for Germany — in its mercantilist neutralism — to continue to tiptoe by the question itself, hoping the conundrum simply goes away. German neutralism, combined with French Gaullism and Italian, northern and eastern Atlanticism, means a common European policy regarding China will remain a pipe dream.

Third, the most likely outcome is a traffic light coalition of the red (SPD), Greens, and yellow (the FDP). Under the shrewd direction of FDP head Christian Lindner, the two smaller parties — which together have more members of parliament than the “winning” SPD — have already agreed to meet to develop a common negotiating position. Despite the Greens being nominally on the left and the FDP on the right, there is a surprising amount of overlap between the two parties. Both are socially classically liberal, agreeing on issues such as the legalization of marijuana and personal gender identification. Both did very well among younger voters, unlike the more staid SPD and CDU. And both desire complementary Cabinet positions, with Lindner keen to be the new finance minister while Green chancellor candidate Annalena Baerbock desires the foreign portfolio.

The problem will come over economics, as the FDP is passionately for corporate tax cuts and fiscal discipline (very bad news for Southern Europeans desperate to be rid of Germany’s tight limits on European spending), while the Greens are passionate Keynesians, eager to both tax and spend. With so much on the political line, an incoherent muddle of an economic agreement is likely, one which will leave Germany rudderless over its economy for the coming few years.

Fourth, the best political risk way to look at this car crash of an electoral result is that the German election is not over. It is probable that weeks, if not months, of haggling lie ahead of us before a new government is formed. The timing for this drift could not be worse. As Germany remains in electoral limbo, France — with its presidential campaign set for full force in January 2022 — is just about to enter it. Once again, Europe’s two great powers will be politically incapacitated, even as history continues along without them.

Fifth, Germany’s indecisive political result reminds us of an iron law of political risk: Those who do not master history are mastered by it.

• John C. Hulsman is the president and managing partner of John C. Hulsman Enterprises, a prominent global political risk consulting firm. He is also a senior columnist for City AM, the newspaper of the City of London. He can be contacted via johnhulsman.substack.com.