The recent collapse of the “traffic light coalition” goverment, so called because of the traditional colours of the parties involved, stemmed largely from disagreements over the 2025 budget. While personal and political disputes existed between chancellor Olaf Scholz’s Social Democrats (SPD) and the liberal Free Democrats (FDP), the core issue was balancing economic growth with the country’s ongoing green transition. Elections are typically won on domestic rather than foreign policy and this one will likely highlight two diverging societal groups: those who rely on social welfare and those who finance it. Let me be clear – strong democracies thrive on social market economies supported by social welfare. However, maintaining the right balance is challenging and hinges on a state’s economic viability.
Historically, Germany has excelled in this regard. The country’s robust economy, driven by energy-intensive industries and innovative prowess, has been underpinned by affordable Russian pipeline gas. This stability allowed the country to fund generous social welfare policies, including free university education, a minimum wage, parental financial support, unemployment benefits and subsidies for the green energy transition. These measures have fostered social stability but the economic landscape has shifted dramatically since the war in Ukraine. Rising interest rates on state debt and skyrocketing natural gas prices have contributed to three consecutive years of economic contraction – the first such downturn since 1949. The recent coalition’s ambitious spending plans for the green transition included strategies for power plants, a hydrogen transportation grid and contracts for difference. However, coupled with policies such as phasing out nuclear energy, hard coal and lignite, and limiting carbon capture and storage (CCS) to biomass, these measures proved to be prohibitively costly. A proposal to replace natural gas burners in single-family homes only added to voters’ concerns.
A government led by the Christian Democratic Union (CDU) appears the most likely outcome from the snap elections slated for 23 February. Whether this will involve a coalition with the SPD, the FDP or another party remains to be seen, though a partnership with the Greens seems most unlikely.
Regardless of the coalition, any new government – excluding one dominated by the Greens – will likely maintain Germany’s energy transition, while ensuring it aligns with economic growth and technological openness. This could mean revisiting CCS for coal power plants and potentially reopening discussions on nuclear energy, though a substantial return to the latter is unlikely. Homeowners may also welcome a revision to heating laws, possibly permitting natural gas alongside biogas certificates.
Despite campaign promises, however, what the country truly needs is an economic revival that aligns with an affordable, inclusive energy transition. This should embrace all available technologies, while reigniting the innovative spirit that has defined the nation’s engineering and industrial sectors. Germany is at a crossroads. Achieving this balance will determine whether it can steer clear of the wreckage of the traffic light coalition and navigate this pivotal moment.
This article originally appeared as a column on montelnews.com
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