Last Updated on Thursday, 5 September, 2024 at 9:05 am by Andre Camilleri
Lina Klesper is an International Legal Assistant at PKF Malta
Recent elections in the East German states of Thuringia and Saxony have revealed a significant shift in the political dynamics to the extremes. The far-right Alternative for Germany (AfD) emerged as the leading party in Thuringia with 32.8% of the vote, while the newly formed Bündnis Sahra Wagenknecht (BSW) made a strong entry with 15.8%. The BSW was only founded in January 2024 following Sahra Wagenknecht´s split from Die Linke. It quickly gained traction, particularly in eastern Germany, where it appeals to disillusioned voters with the existing political order. In Saxony, the AfD closely trailed the Christian Democratic Union (CDU), securing 30.6% of the vote. These results, coupled with a high voter turnout, underscore the growing influence of political extremes in the region.
The economic landscape of Germany provides a critical context for understanding these electoral outcomes. Germany’s economy, often regarded as the powerhouse of Europe, has been facing significant challenges. After narrowly avoiding a recession in 2023, the country continues to struggle with high energy costs, weakened global demand, and disruptions in the manufacturing sector. In the second quarter of 2024, Germany’s GDP contracted by 0.1%, signalling a precarious economic situation. For the entire year, growth is expected to be minimal, at just 0.2%. Key economic indicators, such as the ifo Business Climate Index, have shown a sharp decline, reflecting growing pessimism among businesses and consumers alike.
In eastern Germany, where economic vulnerabilities are more pronounced, these challenges have been felt more acutely. The region, which has long struggled with the after-effects of reunification, is experiencing rising unemployment, stagnant wages, and a declining population. In Thuringia, for instance, unemployment has risen from 5.6% in early 2023 to 6.4% by mid-2024. This economic insecurity has undoubtedly contributed to the success of the AfD and BSW, as voters increasingly turn to parties that promise to address their immediate concerns.
However, it is essential to note that economic concerns were not the sole drivers of these election results. Broader social and political issues, including national identity, cultural change, and disillusionment with the political establishment, also played a significant role. The AfD’s strong anti-immigration stance and nationalist rhetoric have resonated with voters who feel left behind by the current political system. Similarly, the BSW has capitalized on the public’s discontent with globalization and the perceived failures of traditional parties to protect their interests.
The implications of these electoral shifts are being felt beyond Germany’s borders. The Czech Prime Minister, Petr Fiala, expressed concern over the rise of radical and extremist movements in Germany, warning that such developments are detrimental not only to Germany but also to neighbouring countries. This sentiment reflects a broader unease about the potential consequences of a political shift towards the extremes in one of Europe’s largest economies.
Economic experts and business leaders in Germany are also sounding alarms. Joachim Ragnitz, the head of the ifo Institute in Dresden, has warned of the long-term economic consequences of the AfD’s electoral success. He highlights the potential for a “reputational damage” that could deter both domestic and foreign skilled workers from settling in the region. This, in turn, could exacerbate the existing labour shortages, particularly in industries that are already struggling to find qualified employees. Rainer Dulger, President of the Confederation of German Employers’ Associations, echoed these concerns, pointing out that the success of extreme parties could lead to further economic instability, especially in regions that are critical to Germany’s global competitiveness.
The economic consequences of these election results are not to be underestimated. The AfD’s protectionist and anti-immigration policies, if implemented, could lead to a significant reduction in the flow of skilled labour into the country. This is particularly concerning for regions like Saxony and Thuringia, which are already experiencing a demographic decline. According to projections by the Federal Ministry of Labor, these regions could lose up to 670,000 workers by 2040, exacerbating the labour shortages that many businesses already face.
Furthermore, the rise of political extremes may deter international investment in Germany. Monika Schnitzer, chairwoman of the Council of Economic Experts, warns that companies dependent on foreign workers might reconsider their presence in these regions, potentially leading to an exodus of businesses and further economic decline. Marcel Fratzscher, President of the German Institute for Economic Research, suggests that the AfD’s success could lead to a “brain drain,” as young, well-educated, and motivated citizens seek opportunities in more politically stable and economically vibrant regions.
As Brandenburg prepares for its elections, the trends observed in Thuringia and Saxony could have a ripple effect across Germany. The economic and political implications of these results are likely to influence not only the immediate future of these regions but also the broader trajectory of Germany’s economy. The challenge for the German government will be to navigate these complex dynamics while maintaining economic stability and addressing the underlying social and political discontent that has driven voters towards the extremes.
