Dear friends, colleagues, customers, and clients,

I hope you've had a good start to the summer and are enjoying better weather than us here in Hamburg, where it already feels almost like autumn.

Even though German politics has taken a well-deserved summer break, there are still plenty of topics that continue to simmer. At the moment, hardly a day goes by in Germany without news of new points of contention within the Traffic light coalition of the SPD (Social Democrats), the Greens and the FDP (Liberal Party). After all the three parties came in behind the opposition parties CDU/CSU and AfD in the European Parliament elections, effectively losing their majority, and the Federal Chancellor was called upon by the CDU/CSU and AfD to call a vote of confidence and thus initiate new elections. Furthermore, the budget for 2025 is now the cause of a new dispute. Various commentators see the coalition as a failure.

The draft for the 2025 budget was actually supposed to be ready on the 3rd of July 2024. However, the coalition is currently unable to reach an agreement, so it may take two weeks longer or even until after the summer break. This year's dispute is not the first about the budget. Last year, the coalition parties also fought bitterly concerning the distribution of money to the individual departments.

The renewed dispute within the coalition is contrary to what it set out to do at the beginning of its term of office, namely, to govern well. Instead, the traffic light coalition is dragging itself from one crisis to the next and is unable to govern quietly and well for more than a few days at a time. The coalition seems to be finished. The self-proclaimed “red-green-yellow coalition for progress” now, in the eyes of many Germans, stands for strife, stagnation and economic downturn. Instead of facing up to its responsibility, it passes it on to the CDU/CSU - who previously governed for 16 years, some of which were spent together with the SPD in a grand coalition - Russia, which invaded Ukraine, China, which is manipulating world trade, climate change, or the citizens themselves, who have no desire for change. The constant disputes within the coalition are by no means their own problem.

The weakness and invisibility of Chancellor Olaf Scholz is the second big and almost more serious problem for the coalition. He isn’t governing pragmatically but hides behind passive phrases. The Chancellor's leadership weakness is being exploited by politicians from his own party who are calling for a relaxation of the debt brake. Compliance with this brake is the last redline for the FDP. Germany, as the largest economic country in Europe, is particularly important for the cohesion in the European Union. A dispute over the budget and debts, or even a stagnation in politics, also has a negative impact on the EU.

Through its mixture of inaction and false incentives, the “traffic light” coalition strengthens the political fringes. The right-wing populist AfD and the new left-conservative party “Sahra Wagenknecht Alliance” (BSW) together achieve up to 26 percent in surveys. This puts them just behind the three governing parties.

Because of this, it is worth taking a closer look at the BSW. The new party was founded in January 2024 by Sahra Wagenknecht. She had been an icon of the Left Party for decades. It is therefore hardly surprising that the party has welcomed many former members of the Left Party into its ranks. That is why the party is already represented in the Bundestag and two state parliaments, although it has not yet had to stand for election.

But even in an election, it would probably make it into the Bundestag. According to recent polls, the party is between 7 and 9%, whereas the Left Party stumbles at 3%. The party is difficult to classify in terms of its program, as a party program is still being developed. Observers tend to see it as left-wing on socio-economic issues and rather conservative in socio-political terms. The election program for the 2024 European elections clearly shows a critical attitude towards the institutions of the European Union. The BSW can certainly be seen as dangerous for the left and the right, as clear positions have not yet been found and because it serves both left-wing and right-wing populist stereotypes. So, the party is competing with both the Left Party and the right-wing populist AfD, for example, with its views on Russia's war of aggression in Ukraine. For me, the BSW is a populist, pro-Russia party that still has to find its way but can be at least seen as dangerous for democracy in Germany as the AfD. We will see what happens when the party's manifesto has been published and the party has contested its first elections, but it is definitely the case that a serious new political force is being established on the left wing, and one that will not disappear into obscurity anytime soon.

On September 1, state elections will take place in the two Eastern German states of Saxony and Thuringia. On September 22 state elections will take place in the Eastern German state Brandenburg as well. The results of these elections are eagerly awaited. Opinion polls currently show the AfD ahead in all three states. In Thuringia the AfD is at 28.6% at the moment, whereas the BSW is third, at 20.4%. The CDU (22.4%) lies in the middle of them. In Saxony an almost similar picture occurs (AfD 31.0%, CDU 29.5%, BSW 15.0%), and Brandenburg looks nearly the same (AfD 30%, BSW 17%, CDU 16,5%). Here the CDU is currently only the third strongest party.

Long before the elections, the CDU made clear, that it won’t form a coalition with the AfD. To get a majority then, normally they would have gotten together with the BSW. But regarding their positions, they are far away from each other. It will be very interesting to see what happens in the end. The Greens, SPD and Left Party are not capable of forming a coalition with their poll ratings. It may be difficult to set up stable governments for all three federal states. But what absolutely must not happen is an AfD minister-president, especially in Thuringia, where Björn Höcke, someone who can be legally described as a Fascist, is the leading candidate. The democratic parties will have to get their act together to prevent the AfD from entering government.

We'll see what September brings, hopefully not all bad things. After the state elections in East Germany, I will write you again.

Until then, I wish you a wonderful summer and a relaxing time.

Yours, Magnus Ehrenberg