‘Traffic light’ or ‘Jamaica’? Germany is about to get a whole new kind of government

For a start, the elections will usher in the first new chancellor in a generation. Angela Merkel of the center-right Christian Democratic Union (CDU) has been in the post since 2005 and, while there have been variations in the coalitions she has led—the German electoral system makes it virtually impossible for one party to command a majority on its own—she has been a stable figurehead. Whatever one’s view of Merkel, Germany will not be the same without her.

Perhaps more importantly, though, this election is almost certain to produce Germany’s first three-way coalition in nearly seven decades.

This matters within the country because Germany urgently needs to pick up the pace on issues such as digitization, innovation, education, infrastructural investment, and addressing the climate crisis. Germany is also, alongside France, key to setting and steering Europe’s agenda. The government that emerges from this election will have a long and urgent to-do list. The decisions it takes, and the speed at which it takes them, will depend very much on its unprecedentedly complex composition.

Another likely impact of the three-way set-up will be on the length of time it takes to actually form the new government. Coalition talks have generally taken around two months, but, as UBS senior economist Felix Hüfner put it in a Friday call with journalists, “the more scenarios you have, the more parties involved, the longer the coalition-making will take.”

So buckle up. Before appraising the various configurations that are on offer, let’s start by examining how Germany got here.

Historic realignment

The CDU and its Bavarian sister-party, the Christian Social Union (CSU), always operate in tandem at the federal level, under the “Union” banner. In three of Merkel’s four administrations, including the current one, Union has had a “grand coalition” with its traditional rival, the center-left Social Democratic Party (SPD). In the second Merkel government, from 2009 to 2013, Union teamed up with the socially liberal, fiscally conservative Free Democratic Party (FDP).

Before Merkel, the SPD (under Gerhard Schröder) ruled with the help of the much smaller Green party. Before that, it was Union (under Helmut Kohl) being propped up by the FDP, and so on. These scenarios were all based on the central tussle between Union and the SPD—the two Volksparteien or “people’s parties”—with other parties taking or leaving the stage as relative bit players.

This time it’s different, because there are now arguably three people’s parties. The Greens, who picked up just 9% of the national vote in 2017, are now polling at around 16%. Several months ago, they were polling as high as 25%, trouncing both Union and the SPD, which many (including this writer) saw as a spent power. It was at that point that the Greens fielded its first candidate for the post of chancellor; smaller German parties do not traditionally do this, as they don’t stand a chance of their candidate leading a government. By putting forward Annalena Baerbock for the role, the Greens signaled a new era in German politics.

The landscape realigned over the subsequent months, with the SPD’s candidate—finance minister Olaf Scholz—benefiting hugely from his opponents’ missteps. Baerbock got hit by a plagiarism scandal and, when floods devastated parts of western Germany in mid-August, voters were appalled to see Union candidate Armin Laschet chuckling away in the background of an otherwise-somber press conference amid the wreckage. Scholz himself has been mildly tarnished by his ministry’s role in the Wirecard scandal, but the details of that affair have proven too complex for most voters to parse.

He may be famously robotic in his delivery, but “Scholzomat” is now pitching himself as the Merkel continuity candidate, and his SPD has taken the lead with around 25% in the polls. Union is a few points behind—an historically dismal result for the conservatives—and the Greens are polling around 16%, with the FDP and the far-right Alternative for Germany (AfD) both trailing behind at around 11%. Behind them is the far-left Left party, with a likely 6% of the vote that would allow it to just squeak into the Bundestag; the threshold is 5%.

With roughly a quarter of the electorate reportedly still undecided, Union and the SPD might be able to scrape together a two-party majority of the vote—votes for parties that don’t clear the 5% threshold get distributed among those that do, so the math might still work out for yet another grand coalition. But there is little appetite for this within either the parties or the electorate. Everyone is hungry for change.

The question is, what will the change look like?

Color schemes

German states often have three-way coalitions, so there is an established vocabulary for referring to the various permutations. It’s based on the party colors—Union is black; SPD is red; Greens are green; FDP is yellow; Left is dark red or purple; AfD is blue—and it goes like this:

Traffic light or Ampel = SPD + Greens + FDP
Jamaica (a flag reference) = Union + Greens + FDP
Kenya (ditto) = SPD + Union + Greens
Germany (same again) = SPD + Union + FDP
Red-red-green or R2G = SPD + Greens + Left

(None of these options, you will notice, include the AfD. That’s because they’re pariahs; given Germany’s historical Nazi shame, no respectable party will team up with the far right, even though the AfD has been Germany’s official opposition for the last four years.)

The polling is narrow but, at this point, it seems likely that Scholz will get first crack at forming a coalition. His center-left party will try pretty much anything to avoid another coalition with the conservatives, so the first two options on the table would be Ampel and R2G.

An R2G coalition would easily be the most left-wing government Germany has ever had—a fact of which Laschet, who has ruled out cooperation with the Left, has eagerly been reminding voters at every opportunity.

On the plus side for the SPD, this option would allow for a largely uncompromised agenda. The centrist Scholz is not actually the SPD party leader. That role is shared by Saskia Esken and Norbert Walter-Borjans, who are significantly more left-wing than he is, and who have stayed out of the limelight during the campaign—but their influence will instantly resurface during coalition talks. On the other hand, the Left has ideas about foreign policy that are anathema to the SPD; it wants Germany to leave NATO, though it has recently indicated that this will not be a red line for the party in coalition talks.

The markets are not pricing in the possibility of a red-red-green government, said UBS capital goods analyst Sven Weier on Friday’s call, but even if it does appear he said the impact could be muted—at least, outside the housing sector, where the Left would want nationwide rent caps. “Some of [the Left’s] extreme policies would have to be watered down” due to the Left’s status as junior coalition member, he said.

The traffic-light option would provide a stronger majority and would be more acceptable to many Germans. However, the liberal FDP would want to control the purse strings, with leader Christian Lindner likely taking over at the finance ministry. There’s a lot of common ground here, with all three parties being willing to scrap the CDU’s “black zero” balanced-budget policy, and all calling for higher carbon pricing (as does the CDU, for that matter). However, it is not hard to imagine tensions between the SPD and the Greens on the one side, with their planned tax hikes for the rich, and the FDP on the other, advocating tax cuts for the rich. The FDP also strongly opposes the Greens’ desire to see a common European fiscal policy.

It is quite possible that the SPD and Greens have refused to rule out a red-red-green coalition simply so they have more leverage with the FDP when negotiating an Ampel-coalition policy agreement—Lindner has made it clear that he would prefer to prop up Union instead. But it’s also clear that the SPD and Greens would like to be partners; at the final televised debate between the three candidates on Sunday, Scholz and Baerbock frequently appeared to gang up on Laschet.

That would make a “Kenya” government awkward and fractious, though not impossible. Shutting the Greens out in a “Germany” configuration might provide more harmony, but it would be very close to the low-ambition grand-coalition set-up of which so many people are already sick.

If none of these formulations work out, Laschet could try making “Jamaica” work—but, because of ideological differences, history does not suggest it would. In 2017, Lindner torpedoed talks between the FDP, Union and the Greens, announcing that “it’s better not to govern than to govern wrongly.” The result was the current grand coalition, which the SPD entered very grudgingly.

On that occasion, it took nearly six months from the election for a government to emerge. Germans, Europeans in general, and the markets will be keen to avoid that sort of purgatory this time round.

Correction: This article was updated on Sep. 26 to note that Germany has not had a three-way coalition since the 1950s.

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