Centre punch: Germany’s state-election shocker

The Intelligence from The Economist

This episode of The Intelligence explores three major global developments: the political instability in Germany following recent state elect

Key takeaways

• The CDU failed to reach the 5% threshold in Mecklenburg-Vorpommern, placing Chancellor Friedrich Merz in a precarious political position.
• Aliko Dangote is launching a massive IPO for his petroleum refinery, aiming for a $50 billion valuation on the Nigerian exchange.

Main topics

• German state elections
• African equity markets

Notable quotes

He was going to keep buggering on.

Conclusion

The episode provides a comprehensive look at how political fragmentati

Transcript preview

Speaker 5 (0:00) Support comes from WISE, the smart way to manage the currencies you need around the world. Your life is global. Your money should be too. Some providers promise no fees on overseas transfers. Don't be fooled. Extra costs often hide in bloated exchange rates. Choose WISE. You can send, spend and receive money in over 40 currencies. Count on the exchange rates that you'd usually see on Google. That's how millions save billions on hidden fees. Be smart. Get WISE. Visit WISE.com. Speaker 1 (0:36) Hello and welcome to The Intelligence from The Economist. I'm Jason Palmer. Speaker 7 (0:46) And I'm Rosie Bloor. Speaker 1 (0:51) Today on the show, why African stock markets are having a field day and the truth about blue light before bed. First, another set of results are in from elections to state parliaments in Germany, and it's not looking good for Chancellor Friedrich Merz and his Christian Democratic Union. Speaker 1 (1:29) In the city-state of Berlin and in the northern state of Mecklenburg-Vorpommern, the CDU again got a kicking, this time from both ends of the political spectrum. Speaker 1 (1:46) In Mecklenburg-Vorpommern, it was the same story as in Saxony-Anhalt a couple of weeks ago. The far-right Alternative for Germany, or AFD party, surged. But in Berlin, it was the populist left that made a surprising showing. All that puts Mr. Merz on thin ice. But he put on a brave face. Speaker 8 (2:07) But that's exactly why we can't make these decisions now. The reforms have to come. Speaker 2 (2:26) The Christian Democratic Union, the conservative party of Friedrich Metz, the chancellor, failed for the first time in its history to enter a state parliament in Mecklenburg-Vorpommern. Speaker 1 (2:40) Tom Nuttall is our Berlin bureau chief. Speaker 2 (2:42) They took 4.9 % of the vote just below the 5 % that you need to make it in. And before these elections, that was regarded as a kind of acid test for Merz, who's in serious trouble in his party. If the CDU failed to make it into that parliament, then the sense was that things were going to get really, really hairy for Merz. And that is exactly what's happened. Speaker 1 (3:07) And so who did win in Mecklenburg-Vorpommern? Speaker 2 (3:09) The populist right alternative for Germany came first with around 38 % of the vote. The social democrats who run the state pushed into a very close second spot with 35 % of the vote. And they are likely to continue running the state because no other party will work with the AFD. The second problem... for Merz and for the CDU is that in Berlin, the capital, which is currently run by a coalition led by the CDU, Die Linke, a party of the hard left, had a fantastic result. And the chances are that they will now be able to form a coalition that doesn't have the CDU in it. So they will fall into opposition there as well. Speaker 1 (3:49) And how did Mr. Merz respond to all of that? Speaker 2 (3:51) Well, it was interesting. About 10 minutes after the exit polls in both states dropped at 6pm, Merz came out and made a short speech to the press corps in the capital. This is very unusual for a chancellor to do this on the evening of the state election. And there was a little bit of speculation, you know, is he going to announce he's going to quit? There's been all sorts of speculation about this in recent days. But no, that's not what he did at all. Speaker 2 (4:23) He said that the result in Mecklenburg-Vorpommern was a disaster for the CDU, and that was before we knew, actually, that it had fallen out of the state parliament. He said he was worried about what he called the authoritarian poison dripping into German politics. Speaker 8 (4:43) But he Speaker 2 (4:48) said... to channel his inner Churchill, essentially, that he was going to keep buggering on. He was not going to quit as leader of the CDU. He was not going to quit as chancellor. And crucially, he was going to stick to the reform path of his coalition government in Germany. Speaker 1 (5:05) Remind us about the reform path? A Speaker 2 (5:07) few months ago, the coalition agreed to quite a comprehensive set of pension, labor market, other economic reforms that now need to be approved in parliament. And he said that not only was the government going to stick to this path, but sticking to the path was the best way to tackle the populists of left and right. Speaker 1 (5:25) But clearly, with these results now in hand, that job is going to be harder. Speaker 2 (5:30) Yeah, particularly now that the CDU has fallen out of the parliament in Mecklenburg-Vorpommern, I think the pressure on Merz is only going to increase. A couple of days, I think, could be crucial for his future. There's going to be all sorts of conversations taking place within the party, including a lot of the associations in the German states, which are very important. Power brokers, including some of the state premiers, may have something to say. Those premiers did actually back him in a letter that they all signed last week. So you're probably