In November, the collapse of Germany’s government, an ideologically incoherent coalition between a party of the center-Left, the SPD with the Greens, and the free market (ish) FDP meant that an election was coming, probably in March, a timetable that has now been advanced to February. Calling an early election in Germany is not straightforward, but if a government (or what’s left of it) loses a vote of confidence (which it now has), the country’s largely ceremonial president calls an election, and the fight is on.

A key issue will be Germany’s crumbling economy, and a new report by the country’s central bank didn’t have much by way of comfort to offer there.

DW:

The country’s central bank forecast that output would grow a mere 0.2% in 2025, down from a June forecast of 1.1%. It also predicted growth of 0.8% for 2026, well down on the previously expected 1.4%. The forecast is even more pessimistic for the current year, with the Bundesbank expecting German economic output to decline by 0.2% in 2024. In June, the bank had foreseen a 0.3% increase in real gross domestic product (GDP).

In addition to economic headwinds, Germany’s vital industrial sector continues to struggle as it contends with the cost of two of former chancellor Merkel’s reckless bets, the first on the availability of “cheap” Russian gas, the second on “investing” heavily in renewable energy (made more reckless still by resuming the rundown of Germany’s nuclear power stations). The net effect of these wagers has been to increase German energy costs to a degree that has endangered the ability of its energy-intensive industrial sector to compete. Talk of deindustrialization is not an exaggeration.

In addition to that, Merkel encouraged German industry to develop a close trading relationship with China. But all too predictably, good Chinese clients have become strong Chinese competitors. They learned from what they bought.

And, of course, the Chinese economy’s current weakness has also hit the demand for Chinese German goods.

As if all that were not enough, the coerced transition to EVs and the opportunity it has given Chinese carmakers is destabilizing Germany’s automakers, a key element in the success of Germany’s industrial sector, in terms of both the cash they generate and the expertise they gain. Not only that, they help nourish the ecosystem of smaller industrial companies that has been another of Germany’s strengths.

And job cuts are under way. As the Financial Times noted recently, since the collapse of the coalition, “some of the country’s biggest employers have announced planned job losses, including 11,000 at steelmaker Thyssenkrupp, 3,800 at Bosch, the world’s largest car-parts maker, 2,800 at its rival Schaeffler and 2,900 at Ford.”

Volkswagen, looking at its first-ever plant closings in Germany, is in deep trouble.

And the election itself is unlikely to change much. If current polls are accurate, the center-right CDU/CSU, now led by Friedrich Merz, a vast improvement over Merkel (low bar), is heading for a comfortable first place. It will, however, need a coalition partner to get the votes it needs in parliament. The FDP seem unlikely to make their way back into the Bundestag (that requires getting 5 percent of the votes). The second-placed right populist AfD is deemed to be not salonfähig (socially acceptable) owing, above all, to some distinctly unsavory elements within it. That would mean that the CDU/CSU had to go into coalition with the SPD. The presence of the SPD would mean, unless the party can rediscover its “industrial” roots, that Germany’s decline is set to continue.