There is no way of getting either Germany out of Europe or Europe out of Germany. European integration and the euro-crisis management powerfully shaped the dynamics of the just-concluded elections to Germany’s lower House of Parliament that saw Angela Merkel romp back home for her third four-year term as chancellor. And now, despite the momentous win of her party — the Christian Democratic Union — the Europe factor will continue to drive the way the government shapes up and domestic politics is played out. It is because of the powerful impact of the anti-euro Alternative for Germany party or AfD that Ms Merkel’s CDU now finds itself without its longstanding centre-right ally, Free Democratic Party. The latter has lost a major part of its vote share to the AfD and has now been pushed out of the Bundestag for the first time in history. The loss of FDP’s alliance in the absence of a clear majority for the CDU means that Ms Merkel will have to find allies among the left, and may even have to form a “grand coalition” with the CDU’s staunchest rival, the Social Democratic Party or SPD. The impact of this coalition will be felt more acutely in the domestic sphere than in matters of the European Union, where the SPD has bailed out Ms Merkel on several occasions by helping her pass legislation tied to aid packages for Eurozone countries in Parliament. The social democrats have their own vision of boosting Germany’s economy and helping it help Eurozone countries, and this vision is remarkably different from Ms Merkel’s. They want key policy changes concerning minimum wages, a higher income tax rate to finance education and investment and strict regulation of the financial sector. This is their formula for boosting growth without cutting down government spending. If they can make Ms Merkel agree to some of these measures, if not all, they might even cajole her to rethink the austerity drive further afield in Europe.
This is the “softer hand” that most of Europe is looking forward to. But both the CDU and its potential allies know that going too soft on the Eurozone crisis can ground their own ship in Germany. The AfD may have a meagre five per cent of the vote share this time, but that has been sufficient to decimate the FDP. The older parties cannot afford to allow the AfD to grow by doing anything that further stokes the anti-euro sentiment in Germany.