Executive Summary

Good outcomes, but complacency growing
This year’s report points toward the somewhat ambiguous performance of German policymaking. On the one hand, the economy, labor market, welfare system and public finances are doing extremely well, and excel by international comparison. Even with respect to the topic of refugee immigration and integration, the situation seems to have been brought under control, at least according to some positive feedback from international organizations on the integration measures that Germany has initiated. On the other hand, there is a growing sense of complacency on the part of German politicians and voters. Because of the excellent current governance and social security conditions the immediate pressure for reform has receded over recent years. For the time being, lower reform ambitions and the larger generosity to satisfy short-term political demands have not produced measurable economic or financial damage. However, it is crucial for the long-run perspective that the incoming government adopts a more long-term approach to overall policymaking.
Traditional parties losing strength. Right-populist party now in parliament
An important event within the review period was the federal election in September 2017. The election changed the German party system. Not only did six parties enter parliament but also the main parties lost significantly, namely the bourgeois Christian Democratic Union (CDU) and its Bavarian sister Christian Social Union, CSU), and the Social Democratic Party (SPD). The CDU/CSU dropped from 41.5% in the 2013 elections to 32.9%, while the SPD declined from 25.7% to 20.5%. Consequently, both the CDU/CSU and SPD lost their dominant position within the German party system. The 2017 election was the SPD’s worst result and the CDU/CSU’s second worst result in the post-war period. All other parties gained votes, albeit for some the gains were marginal. The Greens won 8.9%, a gain of 0.55 percentage points, while the Left Party won 9.2%, a gain of 0.6 percentage points. The Free Democrats (FDP) re-entered parliament with 10.7%, a gain of 5.9 percentage points. In addition, the Alternative for Germany (AfD) won 12.6% of the vote, considerably higher than the 5% threshold, and entered the federal parliament for the first time. The Bundestag now hosts a strong right-populist party that includes some right-extremist positions. In the eastern part of Germany, the two main parties lost more votes compared to the western part, and the smaller parties on the left and right of the party spectrum won more votes pointing to a continuing political division within the country.
At the time of writing, the composition of the new government remains uncertain. Whichever parties form the new government, the election results indicate a somewhat shrinking consensus on fundamental policies in Germany. Though this is not yet as dramatic as in other European countries in terms of populists’ voting shares.
Economic indicators strong. Integration
going more smoothly
than perceived
Regarding policy performance, the 2017 situation was characterized by a very favorable picture in terms of key indicators ranging from high economic growth (above 2%), falling unemployment rates and a surprisingly high public budget surplus. With this tailwind, Germany could also keep or even increase its engagement for the provision of national or global public goods in the field of R&D, education or development aid. On social and distributive issues, the situation remains controversial with the usual left-right disputes on the extent and tendencies of social exclusion. However, the current employment boom has further reduced long-term unemployment and reduced the level of irregular employment. On the challenge of refugee integration, observers from international organizations still diagnose problems, such as insufficient coordination of relevant stakeholders. Though they also acknowledge that Germany has reacted quickly and created an environment that is conducive for the successful labor market integration of refugees. Highly salient incidents like Islamic terrorism, xenophobic attacks by right-wing radicals or the G20 Hamburg summit riots by left-wing extremists have undermined popular perceptions concerning public safety even though the objective crime data does not indicate a dramatic increase in criminal incidents.
Quality of democracy remains high
Germany continues to do very well in terms of the quality of democracy. Of course, German democracy is affected by international trends like the continuing decline in market share for high-quality print media, which safeguard public access to information. But these trends are much less pronounced in Germany compared to other countries. The public broadcasting system continues to reach a decent proportion of the population, and provide largely high-quality and independent coverage of political developments. Though this has recently been questioned in some instances. The rule of law and the independence of the judiciary is strongly backed both by political actors’ and voters’ respect for these institutions.
Strategic planning
a weak spot
The indicators for governance capacities continue to show a less convincing positioning compared to the two other SGI pillars. Overall, the governmental system’s steering capabilities are constrained by a lack of strategic planning, which is exemplified by the relatively weak role of strategic policy units. Moreover, coordination processes in multiparty governments are often dominated by informal institutions like the coalition committees where “party politicization” undermines strategic planning and often leads to a lack of consistent communication. Expert evaluations and impact analyses play an important role, and are regularly executed with good methodological standards and impartiality. However, there is considerable scope for improvement to develop strategic policy conclusions from deeper insights.
Success evident, but myopia a danger
Summing up, this year’s report confirms Germany’s current successful governance performance. However, it raises concerns that political myopia and the lack of strategic foresight might undermine the German growth story over the next decade.
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