Germany – Establishment under Attack

The appeal of populist parties in Europe, fueled initially by the dismal economic conditions and painful austerity measures that followed the global economic downturn in 2009, has grown significantly over the last 18 months, catalyzed by a refugee crisis that is widely blamed on Chancellor Angela Merkel’s very liberal asylum policy. Merkel will seek a fourth consecutive term at elections that fall due in September 2017, and recent polling data suggests that the alliance of the main governing CDU and its Bavarian sister party, the CSU, will once again finish on top.
However, the unexpected vote to pull the UK out of the EU and the surprise victory of Donald Trump in the recent US presidential election has contributed to skepticism regarding the ability of pollsters to measure the true extent of the anti-establishment sentiment that is challenging the dominant liberal paradigm throughout the western world. The far-right AfD made a surprisingly strong showing in recent state elections. If the party manages to build on that success in upcoming state elections in Saarland and Schleswig-Holstein in the first half of 2017, the CDU-CSU’s victory would become less certain.
Based on the current poll standing of the various parties, the most likely outcome of the 2017 election will be the renewal of the incumbent grand coalition of the center-right CDU-CSU and the center-left SPD. Combined support for the two parties has fallen by about 10 percentage points since the 2013 elections, but remains above 50%. However, both the AfD and The Left, which represent the extremes of the right and the left, respectively, are polling at or above 10%, and if the data is underestimating their appeal, Merkel may face obstacles to forming a stable government.
Although much attention has been focused on public antipathy toward Merkel’s asylum policy, her government has also faced a backlash from opponents of the proposed free-trade agreement between the EU and the US, which has also been a source of disagreement between the governing parties. However, with the US set to install a president who adopted an anti-trade posture during his campaign and euroskeptic parties set to make a serious challenge for power in the Netherlands and France at elections that will be held in the first half of 2017, the prospects for implementing the so-called TTIP are growing dim, and may be a moot point by the time Germany’s campaign kicks off next year.
Merkel’s party stands to benefit if the recent economic performance is sustained into 2017, but downside risks include the uncertain impact of the initiation of Brexit negotiations on confidence, the potential for political instability in Italy or Greece to revive the euro-zone debt crisis, and the possibility that the outcome of next year’s elections in the Netherlands or France could heighten doubts about the long-term survival of the EU.