Traffic lights or Jamaica – what it means for EUrope

Two possible governing coalitions are emerging after the Bundestag elections: The traffic light under SPD election winner Scholz – or Jamaica under CDU leader Laschet. What does this mean for EUrope?

First of all: relief. The fact that both the Left Party and the AfD lost is a good sign for Germany’s stability, we hear in Brussels. And the fact that both candidates want to form a government quickly puts the fear of a “Merkel vacuum” into perspective. If the new federal government is in place before Christmas, all will be well from the EU’s point of view.

The EU Commission says it can live with both Scholz and Laschet. Its head, Ursula von der Leyen, knows both candidates and is looking forward to working with them.

In truth, a Chancellor Laschet would certainly be more pleasant for the CDU politician. With a CDU-led government, she would retain direct access to the strongest governing party.

With Scholz, on the other hand, she would be on the outside. The Social Democrat gets along better with France’s Macron and Spain’s Sanchez. This would also strengthen the Social Democrats in the European Parliament.

And what do the two possible coalitions mean for European policy?

Let’s start with the traffic light. It is favoured in France, Spain and also in many other southern European countries, since Scholz negotiated the debt-financed Corona reconstruction fund.

In fiscal policy, a return to austerity is not to be expected, but rather an expansion of EU debt. However, a Finance Minister Lindner who wants to return to budget discipline could cause uncertainty here.

In climate policy, Scholz stands for an “eco-social transformation”. Emissions trading for buildings and transport, as proposed by von der Leyen, would not be feasible with the SPD – or only with social compensation.

In digital policy, a traffic light could ensure more ambition. Not because of Scholz, but because of the FDP and the Greens, who are much further ahead on this issue than the SPD and CDU.

And what about Jamaica? That is the desired alliance of the Netherlands, Austria and other “frugal countries” from the “Frugal four”. Hungary and Poland might also feel more comfortable with Laschet.

In fiscal policy, a return to austerity could be expected. Under Laschet, Lindner should have considerably more “legroom” than under Schulz. However, this would also increase the risk of a new euro crisis as under “Merkel II”, where the FDP co-governed.

In climate policy, market-based mechanisms – especially emissions trading – are likely to be preferred. This could lead to further turbulence on the energy markets – the crisis has already begun.

In digital policy, there could also be more speed under Laschet. However, this presupposes that he weeds out “lame ducks” like Altmeier, who is still economics minister. It is doubtful whether he would have the power to do so…

Translated with (free version) The original version (in German) is here