Five reasons why Germany's politics should worry you right now

  • The SPD's membership begins a vote on the coalition deal on February 20.
  • The coalition deal is on uncertain ground.
  • Leadership changes and the rise of the right-wing AfD are worries.
German Chancellor Angela Merkel, leader of the conservative Christian Democratic Union (CDU), gives a press conference in Berlin on February 7, 2018.
Tobias Schwarz | AFP | Getty Images
German Chancellor Angela Merkel, leader of the conservative Christian Democratic Union (CDU), gives a press conference in Berlin on February 7, 2018.

Despite an apparent "breakthrough" in Germany's government coalition talks a few weeks ago, the euro zone's largest economy and defacto leader is facing much more political uncertainty and tumult on a number of fronts.

Here are five reasons why the current state of German politics is concerning:

Grand coalition deal on the line

Markets appeared to breathe a sigh of relief several weeks ago when Chancellor Angela Merkel's Christian alliance, the Christian Democratic Union and Christian Social Union (CDU-CSU), came to an agreement with the Social Democrats (SPD) to form another power-sharing government, called a "grand coalition."

The agreement needs the approval of the majority of SPD's 464,000-strong membership, who are having their say in a postal vote beginning Tuesday, with a result expected on March 4.

Around two-thirds are expected to approve the deal, although some influential members are protesting against it, calling for the SPD to stay in opposition.

Tomasz Wieladek, senior international economist at Barclays, said in a note Monday that the "grand coalition treaty is on thin ice and that a 'no' vote could lead to either a minority government or new elections."

"The latest official poll shows record-low SPD support and that voters believe that the SPD cared more about ministries than content," he said. "This suggests significant risks around the SPD's membership approval vote. Moreover, Angela Merkel's approval ratings have also declined significantly since the election."

SPD leadership uncertainty

In addition to the membership ballot, there are SPD leadership changes afoot that are likely to bring about a change of approach and uncertainty over whether Merkel will see out a fourth term as chancellor (more on that below).

SPD leader Martin Schulz resigned last week following criticism of his agreement to serve as foreign minister in a future coalition government after previously saying the party would stay in opposition.

Martin Schulz, head of the German Social Democrats (SPD), reacts during the SPD federal congress on January 21, 2018 in Bonn, Germany.
Lukas Schulze | Getty Images
Martin Schulz, head of the German Social Democrats (SPD), reacts during the SPD federal congress on January 21, 2018 in Bonn, Germany.

He nominated Andrea Nahles, former labor minister and head of the SPD's parliamentary group, to take his place, and a vote will take place at an extraordinary party congress on April 22. Nahles supports the coalition deal and has said there is "no plan B" should the majority of SPD members reject it.

SPD to play hardball

Although the SPD membership ballot is likely to be approved, there will be more hurdles for the coalition with detractors in both parties, particularly within the SPD.

The party performed badly in September's election; this was largely seen as voters reacting against its former alliances with the CDU-CSU.

However, Merkel's CDU-CSU has made deep concessions to the SPD during coalition talks over a number of key policies (ranging from pensions to the labor market) as well as giving it control of a number of ministries, including, controversially, the finance ministry.

But the SPD's potential future leader Nahles has promised that his party would not be an easy partner in power.

"We will not do a runner in this government. We will make our own policy proposals. We will consciously stand up to Mrs Merkel," Nahles told a SPD rally last week, Reuters reported.

Nahles also inferred that Merkel was not likely to remain in power much longer. "She may be the most powerful woman in the world but the twilight of the Gods started a long time ago… She has been put down for the count by her own party. The chance to renew stands before us," she told the rally, Reuters reported.

Right-wing AfD has become Germany's second strongest party

Alongside the more prosaic political uncertainties in Germany is the specter of the far-right, anti-immigrant Alternative for Germany (AfD) party.

Emmanuele Contini/NurPhoto via Getty Images

A poll reported Tuesday that the AfD, which is a growing force and has a strong anti-Islamic stance, has surpassed the SPD to become Germany's second most popular party.

The Insa survey for the Bild newspaper showed Merkel's conservative bloc at 32 percent, with the AfD at 16 percent, above the SPD on 15.5 percent.

The AfD saw its share of the vote rise significantly in September's election, showing a shift in German social and political attitudes that has worried many in a country haunted by the memory of Nazism.

Merkel's 'twilight'

Chancellor Merkel is arguably Germany's and the euro zone's, most successful political leader in recent history.

She's steered a steady and strong course through the euro zone financial crisis, albeit making austerity-promoting Germany unpopular with its indebted southern euro zone neighbors, and took the moral high ground at the height of the refugee crisis in Europe by allowing over 1 million refugees to enter Germany.

That policy has been seen as a key reason for the rise of the AfD, however, and detractors within her own party criticized the policy, putting Merkel's authority on shaky ground.

In addition, her inability to form a government with the Greens and the pro-business Free Democratic Party in initial talks after the election also cost her time, authority and popularity.

The latest Infratest Dimap poll showed that Angela Merkel remained popular, although her approval rating has declined from 61 percent in October to 49 percent on February 15.

Still, Merkel's fourth term is widely seen as her last, and generally "Mutti," or "mother," as she is popularly known is well-regarded.

"There is still no alternative to Merkel as the leader with a serious message of stability and responsibility," Carsten Nickel, Teneo Intelligence's deputy director of research, said in a note last week.

"This (message) will likely also strongly resonate at the CDU conference on February 26. The traditionally loyal party will greenlight the coalition agreement… However, the main risk to the grand coalition remains the SPD membership ballot," he said.

German Chancellor Angela Merkel attends a two-euro-coin presentation in Berlin on January 29, 2015.
Tobias Schwarz | AFP | Getty Images
German Chancellor Angela Merkel attends a two-euro-coin presentation in Berlin on January 29, 2015.

On Monday, Merkel nominated Annegret Kramp-Karrenbauer, the premier of Saarland State, as the CDU's next secretary general, prompting speculation that Kramp-Karrenbauer could be the party's next leader.

Carsten Brzeski, chief economist of Germany at ING, said last week that while economically-thriving, with a predicted gross domestic product growth of 2.4 percent in 2018, Germany is experiencing some of the political instability more commonly seen in other European countries.

"These days, Germany clearly shows two different faces: the well-known one of a strong and high-performing economy and the unknown one of fragile politics," he wrote in a note. "It looks as if in the future any German Schadenfreude on political chaos in other European countries will be very muted."