Germany’s Fragmentation Weakens Europe

Chancellor Olaf Scholz has lived to fight another day, thanks to Dietmar Woidke. But Germany faces multiple crises and how it manages them will have profound implications for the country and the EU.

The unlikely victory of Woidke, the incumbent Social Democrat, in the local election in Brandenburg, a rural state surrounding Berlin, has given a lifeline to Scholz’s coalition and postponed, at least for now, the prospect of snap elections. But Scholz has become such a political liability that Woidke, who since 2013 has governed the state where the chancellor lives, chose not to involve him in his campaign events to have a fighting chance.

He managed to narrowly beat the candidate of the far-right Alternative for Germany (AfD), garnering 30.9 percent of the votes, against the AfD’s 29.2. The eponymous Sahra Wagenknecht Alliance (BSW), a far-left party founded just a few months ago, finished in third place. The Greens and the Free Democrats—Scholz’s coalition partners—polled miserably. Both failed to enter the regional parliament. The Christian Democrats who were in power with Woidke lost ground, in part because its supporters voted tactically for the SPD candidate who was much better placed to win.

The result of this regional election, coming in the wake of stunning gains by the AfD and the BSW in the eastern states of Saxony and Thuringia, point to three trends that have immense implications not only for Germany but for Europe.

First, Brandenburg is a harbinger of things to come in next year’s federal election. Germany’s political system is fragmenting and Scholz’s unpopular leadership seems oblivious to a shift that benefits the far right and the far left.

For now, AfD leaders are on a roll even if they failed to oust Woidke. Fundamentally, this election was a contest between a centrist, established party that has governed Brandenburg since German reunification and a far-right wing, pro-Russia, and anti-immigration party determined to change the country’s political status quo. A plain-speaking, direct politician, Woidke gave voters a choice: he would step down if the SPD didn’t win. Tactical voting prevailed.

After a polarizing election, Woidke will have a hard time building a coalition with the CDU, who came in fourth. Together, they will have forty-four seats in the state parliament, one seat short of a majority. Either Woidke opts for a minority coalition or brings in the BSW.

BSW is the breakout force of this electoral cycle, becoming the king—or queen—maker in all three state elections. The party has tapped into disaffected eastern—and Western—Germans who are pro-Russia, anti-NATO, and opposed to Germany supplying weapons to Ukraine.

The second trend the Brandenburg election highlights is economic. To have any chance at reelection in 2025, Scholz has to make the economy work and deliver on bread and butter issues such as investing in schools, housing, and roads and reducing the gargantuan bureaucracy. Above all, he has to shepherd a structural revolution in Germany’s deeply ingrained industrial culture.

Take the industrial base that served Germany well over the decades. The powerful car industry and its political lobbies are in denial that the manufacturing and industrial era is ending. That sector, including steel and chemicals sectors have been too slow to innovate. The car sector particularly relied on exports to China just as the industry depended on comparatively cheap energy from Russia until it invaded Ukraine in 2022. Scholz ended that dependency when he shut down the Nord Stream 1 pipeline built for sending Russian gas to Germany.

As for car exports to China, those are under huge pressure. Cheaper Chinese cars are capturing part of the German market—not to mention America’s Tesla. The German car industry is in panic. Volkswagen is threatening layoffs, which would be unprecedented.

Scholz’s response has been to pump more subsidies instead of marshalling more innovation. German industry remains behind the curve on digitization, let alone AI. The car industry also faces the prospect of facing EU fines for missing the 2025 levels of CO2 emission targets. The goals had been set based on the assumption that there would be a booming market for electric vehicles, but that hasn’t been the case. The availability of charging stations not to mention cars is completely inadequate.

The third trend the Brandenburg election underscores relates to the EU and Germany’s role within it.

Just a few weeks before that election, Scholz announced the temporary introduction of border controls. Some are spot checks. Others are more stringent. Scholz was responding to the terrorist attacks, most recently in Solingen—and to the public’s sense of growing insecurity over what it believes is an unmanaged asylum system.

By reintroducing border controls, Germany is undermining the Schengen system introduced in 1996—the EU’s crown jewel that enabled most citizens to move across a borderless Europe. The whiplash from the electoral advance of the AfD and BSW could endanger one of the pillars of the European construction.

There are other gripes about Berlin’s attitude to the EU. The coalition opposes more monetary integration that would include a capital markets union to harmonize capital market rules and an EU-wide deposit insurance. As the European Central Bank recently stated, a banking union was about moving ahead with “a genuine Economic and Monetary Union […] to create a more transparent, unified and safer market for banks.”

It is unlikely that Scholz his coalition will embrace more monetary or political integration or come up with solutions for asylum issues. The momentum of the new European Commission will be greatly curtailed by the German limbo that is expected to last for at least another year.