German politics: “continuity” Ar min to succeed Angela?

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●  Advantage Armin: Armin Laschet has moved one step closer towards succeeding Angela Merkel as German chancellor after the 26 September election. Having made it to the top of the CDU party in a hotly contested vote in January, he today secured the backing of CDU’s executive board as the candidate to be the next chancellor. However, his rival from the smaller Bavarian CSU, Markus Söder, who had declared on Sunday that he also wants to head the CDU/CSU ticket, has not thrown in the towel. Hoping for support from CDU grassroots organisations, Söder now wants the joint CDU/CSU parliamentary faction to come out in his favour. We expect the issue to be settled by the end of the week. More likely than not, Laschet as the head of the bigger CDU will prevail, in our view. It will likely be noisy, though.

●  Open conflict: With the choice of Laschet over Söder, the CDU executive board has taken two risks. First, Laschet is far less popular than Söder. In an “ARD Deutschlandtrend” poll from 1 April, 54% of respondents rated Söder as a good candidate to be chancellor versus a mere 19% for Laschet, whom 67% saw as not suitable. Even among supporters of the CDU/CSU, Laschet (29% “yes”, 59% “no”) was far behind Söder (79% “yes”, 14% “no”) when asked if they would be a good candidate. Second, the open conflict could further tarnish the image of the CDU/CSU.

●  CDU/CSU still ahead: After a surge in support for the CDU/CSU during the first wave of the pandemic last spring to 37%, the party has fallen back to 27% in recent polls. Slow vaccination progress and a kickback scandal have hurt. Nonetheless, the CDU/CSU continues to lead the Greens by some five points and remains the favourite to win on 26 September. If so, Laschet (or – less likely – Söder), would replace Merkel as chancellor – see also The race is on.

●  Adjusting our probabilities: Laschet has often beaten the odds, for example by winning a state election in North-Rhine Westphalia against a much more popular SPD incumbent to become the state’s prime minister in 2017. That he prevailed against strong rivals from within the CDU in January shows his qualities as a political operator. Nonetheless, Söder would probably have an even better chance to win on 26 September than Laschet. As Laschet has now been backed by the CDU’s top echelons, and in response to the open conflict between CDU and CSU leaders, we slightly change our probabilities for potential coalitions after the German election. We now see a 65% rather than 70% chance that the CDU/CSU will lead the next German government, most likely with the Greens as junior partner – see chart above. This leaves a probability of 35% for a government without the CDU/CSU, up from 30% before. Such a government could be a coalition of the Greens and the SPD with either the liberal FDP (20%, up from 15%) or the far-left Left Party (15%) as third partner. Only the latter option would herald a major shift in German policies, notably towards tighter labour, housing and product markets regulations that would reduce German trend growth.

●  The next steps: The Greens will nominate their candidate on 19 April, with Annalena Baerbock slightly more likely to lead them than Robert Habeck. This puts extra pressure on CDU/CSU to resolve their conflict by the end of this week. Apart from occasional disputes with Merkel over the need for a stricter lockdown, Laschet has usually supported Merkel on key policies, including her handling of the 2015 refugee crisis. He is seen as the continuity candidate.

Holger Schmieding

Chief Economist

+44 7771 920377

[email protected]

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