According to a Reuters poll on February 17, with 29.2% of the vote, the conservative union parties, CDU as well as CSU, are leading the electoral race to form a government. The Alternative for Germany (AfD) gained over 4.5% vote share since June 2024 and currently is at 21.3%. Sahra Wagenknecht Alliance (BSW) is polling at 4.5%, as per the report.
What are the key determinants in the election?Immigration and Security
Considering the large influx of refugees and asylum seekers, immigration has become one of the key political issues in the country. After a series of terrorist attacks in Magdeburg, Aschaffenburg, and Munich, many political stakeholders have linked immigration to rising national security threats.
While the outgoing German Chancellor Olaf Scholz had promised to accelerate asylum procedures, CDU and CSU have always remained strong proponents of stringent policies against illegal immigration. More often than not they have pressed the government to strengthen national borders.
Economy
The German economy has contracted more than expected in Q4 of 2024, triggering concerns of a recession as political uncertainty looms ahead of the snap election.
According to Reuters, the country’s GDP declined 0.2% QoQ, compared to analyst expectations of a 0.1% decline. Europe’s largest economy is grappling with ongoing challenges like rising competition from international markets, high energy prices, elevated interest rates, and an uncertain economic outlook.
Citing trade tensions and domestic instability, the government has revised its 2025 growth forecast to 0.3% vs an earlier estimate of 1.1%. The country’s automotive industry, which is considered to be the backbone of the economy, is plagued with sluggishness because of China flooding European markets with its products.
Public finances & budget
One of the key challenges for Germany’s new government will be to fix a budget shortfall of nearly €25 billion, which led to the fall of Scholz’s coalition and left the country’s budget situation in limbo.
The crucial impediment is the country’s constitutional provisions that strictly limit annual borrowing to 0.35% of the GDP, except in emergencies. With burgeoning defence costs and spending on green as well the digital projects, tax revenues are insufficient to meet expenses.
The Union and the Free Democratic Party (FDP) oppose the raising of the public debt cap, considering it untouchable. The Social Democrats, if they come back to power, have no plans of reforming the pension system.
They have often stressed the proposal of increasing the minimum wage and introducing a wealth tax for the riches in the country. This stance is also shared by the Greens. On the flip side, the FDP and CDU advocated reforms to the pension systems, tax cuts for businesses, and ‘cutting red tape’.
Aid for Ukraine & defence spending
Due to rising defence spending, Germany’s public finances are under severe strain. The Bundestag was proactive in approving a €100 billion fund after Russia invaded Ukraine. In 2024, €20 billion from this fund was included in the defence budget, scaling it to nearly €72 billion—or over €90 billion, when aid to Kyiv is considered.
For the time Germany met NATO’s 2% GDP target with this arrangement. The CDU & CSU plan to increase defence spending further, while the SPD and Greens are also proponents of military aid to Ukraine.
The recent snap elections in the United Kingdom and France have been disastrous for the incumbent and have largely benefited the opposition parties. With most of the polls showing the conservatives gaining the ground substantially and parties like AfD gaining the decisive vote share, the shift towards ‘right’ looks more probable.
But as the right surges in Germany, the road to forming a stable government may be anything but straightforward.
