German businesses optimistic about potential three-party coalition

If Reinhold von Eben-Worlée gets his wish, Germany will soon have its first ever three-party ruling coalition — and it will work.

It may be a pipe dream. But von Eben-Worlée, who heads a 170-year-old raw materials supplier, believes Germany today has a real chance to shift gears after its two main parties were locked for eight years into chancellor Angela Merkel’s “grand coalition”, which he said failed to tackle the country’s biggest challenges.

Echoing the views of a dozen business leaders consulted by the Financial Times, Eben-Worlée is counting that the Greens and liberal Free Democrats — widely seen as the new political kingmakers — will put aside their differences on debt and taxes, and come up with a platform that takes them into power alongside one of the two big parties.

“New issues are coming on to the table that the grand coalition has slept through,” said von Eben-Worlée, who is also president of Die Familienunternehmer, an association representing family businesses. He stressed that the next government will hopefully “see the economy as a partner in sustainability, not as an opponent and not as an apprentice”.

All of the German bosses told the FT they were pleased that extremist left and rightwing parties did not make more headway.

“I am glad that the voters strengthened the political centre and weakened the parties on each end of the political spectrum,” said Carsten Knobel, chief executive of Henkel, the maker of Persil washing liquid and Loctite glue.

Some also felt relieved to see the back of the grand coalition, which joined Merkel’s centre-right Christian Democrats with Bavaria’s Christian Social Union and the left-of-centre Social Democrats.

However, they fretted the inconclusive election result could produce a messy and incoherent coalition, possibly led by the SDP’s Olaf Scholz, that fails to tackle the issues Merkel let slip after years of stagnant public investment, in particular the twin challenges of climate change and digitisation.

“Germany’s future economic model is at stake,” said Allianz’s chief executive Oliver Bäte, calling for “true transformation” that combines digital innovation and decarbonisation.

Recent German experience of attempted three-party coalitions is inauspicious. In 2017, many business leaders lambasted FDP boss Christian Lindner for walking out of coalition talks with the CDU/CSU and the Greens.

At the time, Ingo Kramer, president of the Confederation of German Employers’ Associations, called Lindner’s move “a shame” and criticised the liberal leader for failing to “take on responsibility for the country”.

Today, however, CEOs are more confident that the pro-business liberals will play a more constructive role and restrain the tax-and-spend and interventionist instincts of the more leftwing elements of the Greens and Social Democrats, while also backing action to tackle climate change.

“I expect the Greens to drive the government in the right direction, while the liberals will keep the focus on the free market,” said Henrik Follmann, the third generation of his family to run its eponymous chemicals group.

Even in Germany’s industrial heartland, there is strong support for a faster shift towards a greener and more modern economy.

Herbert Diess, chief executive of Volkswagen, which is spending €35bn on developing electric vehicles, this week called for Germany to raise its CO2 price from €25 per tonne to €65 per tonne by 2024. That is even higher than the Greens’ manifesto commitment for a CO2 price of €60 euros by 2023.

“Only tangible measures will advance decarbonisation,” said Diess, who has long been critical of Germany’s energy mix and also called for an end to fossil fuel subsidies. Diess urged lawmakers to “bring forward the phaseout of coal”, currently planned for 2038.

Christian Bruch, CEO of Siemens Energy which has a large fossil fuels business, took a more nuanced view. Any increases in the CO2 price must “find a balance between what our industry can manage and what can trigger change”, he said.

“Public investments can be one trigger,” Bruch said. But companies also need “clear investment conditions . . . to invest money in sectors like wind energy and transmission”.

Bosses of Mittelstand companies, which make up Germany’s industrial bedrock, in particular want more investment in digital infrastructure: the country’s high-speed broadband is patchy, and the public sector often still communicates by fax.

On Wednesday, the Chambers of Commerce and Industry said 61 per cent of the 3,500 surveyed companies identified digitisation as a priority.

“Germany as a business location has been steadily losing attractiveness,” said Klaus Fischer, owner of the Fischer Group, a maker of wall plugs and car parts near Stuttgart. “Citizens wanted change in many areas, such as education, climate protection or even foreign policy. The CDU did not recognise this and has now received the bill for it.”

Whether the stable and focused three-way coalition that German businesses hope for will actually happen, and then be able to deliver all these changes, remains the million euro question. After all, the country has never had such a coalition before.

Henkel’s Knobel said: “It will not be easy to compromise during the negotiation process given their diverging positions, particularly when balancing the need for climate action with ensuring German industry’s competitiveness.”

Stefan Wolf, CEO of car parts maker ElringKlinger, went further, saying he “would have preferred to have only two parties that can build a coalition”. He worried “there are some risks [of political instability] and we’ve seen that with other countries where they have these big coalitions”.

To date, Germany’s political system has been “very effective at providing stability, but it is not so good at bringing decisive action”, warned Clemens Fuest, head of Munich’s Ifo Institute, which conducts a benchmark monthly survey of the country’s businesses.

Additional reporting by Erika Solomon in Berlin