Rise of the Far-Right and Economic Risks Ahead of State Elections in Germany
Ahead of the upcoming state elections in Germany, the anti-immigrant policies and Eurozone exit scenarios of the surging far-right AfD party pose major risks to the German economy and labor market.
Ahead of the critical state elections in Germany in September, the growing strength of the far-right AfD party has heightened concerns over the country's economic future. Experts warn that the xenophobic policies and exit scenarios from the Eurozone pursued by the party could cause severe devastation to growth, employment, and the public budget.
Political Landscape Ahead of Critical State Elections
State elections will be held in Saxony-Anhalt on September 6, and in Berlin and Mecklenburg-Vorpommern on September 20. Recent polls indicate that The Left Party and the AfD could achieve strong results in these states.
While political polarization increases in the capital Berlin, the ruling coalition is reported to be losing votes. Following the resignation of Berlin Governing Mayor Kai Wegner, the low recognition of CDU candidate Stefan Evers increases uncertainty.
Political Polarization and Housing Crisis in Berlin
According to the latest research by German public opinion research institute INSA, the AfD ranked third citywide in Berlin with a 17 percent vote share. The AfD links the housing crisis in the city to immigrants and advocates that public housing be given exclusively to locals.
The possibility of a triple left-wing coalition consisting of The Left Party, the Greens, and the SPD also remains on the agenda in the capital after the elections.
AfD Concerns in the Business World
Analyses in the German press emphasize that if the party comes to power, there are five fundamental risks in the economy: a contraction of prosperity, a labor shortage, exit from the Eurozone, budget deficits, and energy dependence.
According to evaluations, the economic policies of populist governments could contract production by an average of 10 percent in the long term, which would mean an economic loss of approximately 450 billion Euros for Germany.
Impact of Anti-Immigrant Policies on the Workforce
It is stated that the AfD's mass deportation and anti-migration policies could cause serious problems in the labor market due to the aging German population. According to experts, if immigration stops, a labor shortage of 7 million people could emerge over the next 15 years.
While immigrants account for 33 to 40 percent of employees in food production, construction, gastronomy, and logistics sectors in Saxony-Anhalt, it is reported that one in every five doctors working in the state is of foreign nationality.
The Cost of Eurozone Exit Scenarios
The AfD's advocacy for leaving the EU and the Eurozone through a Brexit-like process is evaluated as a significant risk for the export-driven German economy. It is calculated that a possible exit could lead to a loss of 700 billion Euros within five years.
On the fiscal side, it is stated that the AfD's tax and pension promises could create a 180 billion Euro deficit in the budget, while policies opposing renewable energy would increase the country's foreign dependency.
Warnings from Institutes and Experts
Reint Gropp, President of the Halle Institute for Economic Research, stated that xenophobic policies could produce devastating results for the economy and that annual growth in a state governed by the AfD could drop between 0.5 percent and 1 percent.
ING Chief Economist Carsten Brzeski stated that the state elections could affect federal politics, describing the process as Germany's hot political autumn and saying it could yield results that might prematurely end the current coalition government.
AfD's Objectives in Saxony-Anhalt
In Saxony-Anhalt, which will go to the polls on September 6, the AfD is far ahead with a 42 percent vote share. The AfD is followed by the CDU with 22 percent and The Left Party with 13 percent.
While the political isolation policy of other parties against the AfD continues, the party aims to form a single-party government in the state. The state's working-age population is expected to lose 13 percent over the next 10 years.