What comes after Merkel?
The era of German Chancellor Angela Merkel will definitively end in autumn after almost 16 years. Her chancellorship was marked by both a series of crises – starting with the great financial crisis and then followed by the euro and refugee crises and finally the pandemic – as well as Germany’s ascension from being the “sick man of Europe” to becoming the continent’s economic growth engine. Merkel’s successor, whoever it may be, has big shoes to fill. An initial course setting on the road to the post-Merkel era has been charted in recent days.
The CDU is setting its course
The post-Merkel era has already begun. At its digital convention last weekend, Germany’s Christian Democratic Union (CDU) elected Armin Laschet to be its new party chairman. The prime minister of North Rhine-Westphalia relegated his rivals Friedrich Merz and Norbert Röttgen to second and third place, respectively. As the CDU’s new party leader, Laschet succeeds current defense minister Annegret Kramp-Karrenbauer, who stepped down from the chairmanship in early 2020. Sitting Chancellor Angela Merkel thus now has another favored successor up her sleeve because in recent years, Laschet has been more of a “Merkelist” and more committed to her triangulating centrist style of politics than practically any other high-ranking CDU politician.
However, whether 59-year-old Laschet will actually get a chance to follow in Merkel’s footsteps and stand as the CDU’s candidate for chancellor in the Bundestag elections on September 26 won’t be decided until March, when the CDU and its Bavarian sister party, the Christian Social Union (CSU), will choose who will run as their joint candidate. CSU head Markus Söder, who enjoys much greater popularity at the moment, could thwart Laschet’s ambitions. According to a poll cited by German broadcaster Deutsche Welle, 43% percent of voters would like to see Söder succeed Angela Merkel, whereas only 12% favor Laschet. Yet, if past is prelude, the Bavarian branch of the CDU and Mr. Söder are likely to give in and back down if push comes to shove for the good of both parties. This, at least, is the most probable scenario as things currently stand.
According to a poll 43% of voters would like to see Söder succeed Angela Merkel, whereas only 12% favor Laschet.
The supertanker remains on course
This scenario has the best odds of playing out not least because Armin Laschet is also the candidate most capable of reunifying the different factions among the Christian Democrats. The very close election result last Saturday – 53% of the delegates ultimately voted for Laschet and 47% for Friedrich Merz – underscores that a large minority of CDU members want a more explicitly conservative party alignment. The new CDU chairman faces a difficult task of maintaining coherence in a party that is struggling to find its identity while simultaneously trying to lure voters from the environmentalist Green Party and the right-wing AfD. Contrary to the opinion of many observers, in the runup to the party convention Laschet showed that he may indeed possess the personal qualities needed to succeed in that mission because he appeared more ambitious and combative the closer the vote drew. In his final speech before the vote, which centered on the issue of trust, Laschet emphasized his working-class background and quoted his father, a former coal miner, as saying, “when you’re down in a mine, it doesn’t matter where your colleague is from. What matters is: can you rely on him?” The CDU delegates decided on Saturday that they can rely on Laschet.
Germany’s Christian Democrats are thus betting on continuity rather than on a lurch to the right under Friedrich Merz. Whereas an election campaign led by Merz would have advocated for distinctly conservative fiscal and monetary policy stances, the supertanker Germany with Laschet at the helm is likely to stay on a course similar to the current one in the tow of Angela Merkel. This means that in the context of the European Union, Merkel’s cautious pro-Europeanism and her policy of compromise and conciliation within the European economic community between the wealthier north and the poorer south also look destined to be continued.
The Francophile Rhinelander Laschet could even potentially revive the off-and-on strained relationship between Germany and France. Although the latest developments in German politics do not have any immediate repercussions for the financial markets, a certain course may already have been set that could ultimately keep Germany in the “status quo” lane if the Christian Democrats win the Bundestag elections in September. Under the leadership of Laschet, Germany would likely remain a balancing and dependable anchor of stability in the middle of Europe (not to mention the continent’s largest national economy) that will also make financial compromises if need be for the good of the greater whole. Financial market participants will likely appreciate such continuity and stability for the simple reason alone that this would avert the price turbulence that would be conceivable in other political scenarios.
The CDU’s party platform needs to be refreshed and the shortcomings of the Merkel era need to be addressed.
How green will the agenda be?
However, even under a potential Laschet chancellorship, not everything can (or would) stay the same as before. After all, the CDU’s party platform needs to be refreshed and the shortcomings of the Merkel era need to be addressed. Those shortcomings include Germany’s creaking infrastructure, digitalization deficiencies and the country’s partially underambitious policy response to climate change. There is hope that the newly elected CDU chairman will adopt a greener course because Laschet’s climate policy track record during his tenure as the prime minister of North Rhine-Westphalia, the (former) heartland of German heavy industry, is at least viewed as being ambiguous. On one hand, in public debates Laschet has often presented himself as a moderate broker of interests and has pointed out the crucial role played by his state of North Rhine-Westphalia, which will bear the brunt of the burden of Germany’s early phase-out of coal. On the other hand, however, the coal exit deal also brought him a great deal of criticism for his generous stance on compensation payments to owners of coal-fired electrical power plants.
During the last public CDU candidate debate prior to his election, Laschet warned against curtailing Germany’s economic opportunities through “excessive” climate protection actions and scaring away industrial companies with high electricity prices and stringent regulations. This stance stands in stark contrast with the idea vehemently propagated by the Merkel administration over the past years that rigorous and rapid climate policy action actually works as an asset that creates greater economic stability in the long run. A tentative policy agenda for the post-Merkel era published by Laschet in early January was remarkably quiet on climate protection and energy policy issues, with the most specific idea on the future of mobility being “flying taxis.” German news magazine Der Spiegel concluded that “nothing thus far indicates that a CDU headed by Armin Laschet will become a driver of climate protection,” adding that “this isn’t enough for a chancellor in a decade that will be crucial for climate policy.”