The first “grand coalition” government in Germany’s postwar history was formed in 1966 to address an unexpected economic downturn, amid concerns over a nascent neo-Nazi far right. Nearly six decades later, as the Christian Democratic Union (CDU) and the Social Democratic party (SPD) prepare to join forces across the right-left divide for the fifth time, following February’s snap election, the circumstances are superficially similar. The scale of the challenges, however – and the sense of jeopardy – are of a different order.
As geopolitical events have undermined its trade‑led business model, the German economy has been undergoing the most prolonged period of stagnation since the second world war. Not unrelatedly, the extreme-right Alternative für Deutschland (AfD) party – elements of which are judged a threat to the democratic constitutional order by security services – has risen in the polls to become the second-biggest party in the EU’s most powerful member state. At the same time, a Putin-sympathetic Donald Trump is dismantling the transatlantic security guarantees on which Germany has relied in the postwar era.
In response to this menacing conjuncture, German politics is reinventing itself at a vertiginous pace. On Tuesday, at the behest of the chancellor-elect, Friedrich Merz, the outgoing Bundestag voted to change the country’s Basic Law to allow historic levels of public investment in defence, national infrastructure and the climate transition. The so-called debt brake – a constitutional restriction on borrowing that had come to symbolise Germany’s fiscal conservatism – is being unceremoniously sidelined.
Mr Merz is a former investment banker and avowed economic liberal. His welcome conversion to the case for a proactive state, and a new leadership role for Germany in bolstering European security, has been one of the more eye-popping moments in recent political history. The scale of investment licensed by the Bundestag vote will need to be rubber-stamped by parliament’s upper house on Friday. But shares in defence companies and manufacturing giants such as Volkswagen are already up, alleviating fears of deindustrialisation that were undermining national morale and fuelling the rise of the AfD.
For both Mr Merz’s CDU and the SPD, this paradigm shift represents a bold and necessary leap into uncharted territory. In recent years, coalitions across the political divide have delivered stability but also, at times, an enervating impression of stasis. As Angela Merkel’s unhappy sidekicks in the 2010s, the SPD lost a sense of distinct identity and purpose, while blue-collar voters drifted to the xenophobic far right in large numbers. Berlin’s insistent advocacy of a fiscal orthodoxy unfit for the times contributed to a Europe-wide crisis of the political centre, manifested in the rise of rightwing populism across the continent.
Liberated by this week’s groundbreaking vote, Mr Merz’s “grand coalition” is set to break that mould. Countries such as Britain and France, where prolonged economic underperformance has also been accompanied by the rise of the populist right, should be taking note. As politics in western liberal democracies has polarised, mainstream politicians have sometimes talked about the need for a “radical centre”. Much of the time that has amounted to a slogan without substance. But as the two traditional behemoths of German politics wake up to the need for urgent change, Mr Merz’s administration may prove to be the real deal.
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