Germany’s Crisis and Brexit, Put Simply

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By Blog Writer Charlotte Spencer-Smith

The crisis in Germany’s political leadership adds a dose of reality to the hopes of Britain’s Brexit deal. Many a German government has been formed by coalition negotiations, but the weakening of Angela Merkel and rising political uncertainty in Germany is sobering for the Brits, as German attention is increasingly focused on domestic instability.

What’s happening?

In short, after failed coalition talks, it has proven exceedingly difficult for Angela Merkel’s Union to find a solution to form a government and destabilise Germany.

Following German elections at the end of September placed the right wing populist Alternative für Deutschland (AfD) in third place behind establishment parties the CDU/CSU Union, Angela Merkel’s party, and the Social Democratic Party (SDP). Merkel’s Union needs coalition partners if it wants to form a majority government, but the rise of the AfD has proven the fly in the ointment. This is because after the election, the SPD refused to form a new coalition with the Union, because this would make the AfD the first opposition party, an impossibility for the SPD. 

As a result, the Union was forced to find other coalition partners, spending almost five weeks trying to find enough common ground with the German Green Party and the Free Democratic Party (FDP). Last week, the FDP walked out of these talks, bringing the possible coalition to an end. While the FDP blames political differences, the party’s critics say that the exit is a strategic PR move.

Meanwhile, Angela Merkel is faced with a stark choice: attempt to form a minority government or call new elections. A minority government would have to gain support from the opposition for any measure it wants to put through. On the other hand, new elections could strengthen the AfD even more. Indeed, the SPD is now backing away from a flat-out refusal to form a government. The Union and the SPD will start discussions this week, but the SPD will not decide anything before its party conference in December, so the future remains uncertain. 

How will this affect Brexit?

In the short term, the political crisis will not change much. However, in the longer term, the instability could weaken Germany’s leadership role in the EU, and potentially in the negotiations. Angela Merkel remains Chancellor for the time being, and could well remain Chancellor in the next government. However, former German ambassador to the UK, Thomas Matussek, has said that the political crisis will force the country to focus more on domestic affairs. This new attitude will be to the detriment of Brexit negotiations, as “in the medium and long term, of course it would be very, very bad if the German input is missing”.

If Merkel is unable to form a coalition with the SPD, she will have to choose between leading a minority government or new elections. In the best case scenario, this would weaken her ability to lead even further. In the worst case scenario, either of these outcomes could fuel a new political crisis or even lead to the Chancellor being replaced by a successor. A successor will not come from the AfD – at least not for now. In the long term, we will have to get used to uncertainty even from within the most stable parts of the European Union.

Could the crisis be a golden opportunity for a Brexit deal?

This is unlikely. Some pro-Leave voices in the UK, like Jacob Rees-Mogg, believe that the German crisis will make it easier for Britain to put through its agenda, as Merkel will need a deal to cut her losses. The German food and agriculture minister, Christian Schmidt, denies this, underlining that the consequences of a no-deal Brexit are much worse for the UK than for Germany. Germany is certainly aware that the UK needs the deal more: a study commissioned by the German Ministry for Economic Affairs this summer concluded that “Brexit will be much more expensive for the UK than for Germany”. The study forecasts that while a hard Brexit would knock 0.2% off German GDP, it would cost 1.7% of British GDP.

Brexit is certainly not an election issue in Germany – the primary political battleground has been immigration. It’s important to remember that for many Germans, Brexit is a foreign affairs matter. Guardian journalist Martin Kettle says that a senior German official he spoke to ranked Brexit as “about the eighth or ninth issue on Merkel’s to-do list in foreign affairs, never mind the domestic politics that are any leader’s inevitable priority”.

This is not to say that Germany is not interested in a deal. A no-deal Brexit would cost the German auto industry 2.35bn EUR per year in customs duties alone if it had to trade with Britain under WTO rules. The UK is Germany’s third largest export destination – and also the source of its best foreign trade surplus at 50bn EUR per annum. The aforementioned study commissioned by the Ministry for Economic Affairs forecasts fewer losses to GDP for both the UK and Germany if a deal can be reached.

Sources and Further Reading:

In German:

Image: EU2017EE Estonian Presidency @Flickr

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