More than 1,700 German companies are active in India and provide some 700,000 jobs in the country. There are also hundreds of Indian businesses active in Germany, which have invested billions of euros in pharmaceuticals, information technology, and the automotive industries.
Imagine it’s the year 2029 and India is going to the polls to elect members of the 19th Lok Sabha. But this time one name is missing from the voting list for the first time in 15 years—Narendra Damodardas Modi. This year, the 79-year-old popular and highly successful leader, who defied the BJP’s unwritten rule of standing down at the age of 75 and went on to win the 2024 Lok Sabha, has now decided to hand the leadership of the party to a younger person. Imagine also that, having survived its self-destruct mode in the early 2020s, a resurgent Congress Party with a strong and popular leader is hot on the heels of the BJP, in fact leading most of the polls in the run-up to Election Day. You can now imagine how Germans are feeling about today’s elections.
Germany’s “Modi”, Angela Merkel, became Chancellor (Prime Minister) back in 2005, and over the subsequent 16 years and four terms of office she has guided Germany to greater power and prosperity. She has steered her country and Europe through crisis after crisis, and in doing so she has become to many around the world the embodiment of grown-up, pragmatic leadership. Now her long political story, the one that began on the fateful night in November 1989 when the wall dividing West and East Germany came crashing down and the 35-year-old East-German quantum physicist joined the crowds pouring across the now-open border to freedom in the West, is ending. A political giant is leaving the stage. She will leave office not only as one of the most recognisable global politicians, but also the most respected. International polling by YouGov last month gave her the most positive ratings of any world leader, and most agree that she is the pre-eminent European leader of the post 1989-era.
So, who is Angela Merkel’s likely successor, and what effect will a change of Chancellor have on Germany’s relationship with India?
Over the past twelve years, the only question during the German elections was which party would join Merkel’s Christian Democratic Union (CDU) in forming a government with Merkel as Chancellor. In Germany, politics were boring. But this year they have become interesting, and some seasoned commentators are even using the word “exciting”. There are three likely contenders to replace Merkel: the CDU candidate, Armin Laschet, is her chosen successor; Annalena Baerbock is the Green Party candidate; and Olaf Scholtz is making a bid to put the Social Democrats (SPD) back in the chancellery after 16 years of conservative leadership. Of the three, Baerbock is the radical candidate and is more committed to an integrated Europe, more confident of Germany’s leadership in Europe and more focused on innovation and tackling climate degradation. Although a socialist, Scholz has morphed into a “continuity” candidate, conscious of the fact that Germans don’t like change.
In the spring, the centre-left Greens surged to 26%, but are now polling just 16%; then Merkel’s centre-right CDU reasserted its polling primacy, now at 22%; more recently, the centre-left SPD surged past both and into the lead with 25%. The conservative-liberal Free Democrats (FDP and currently at 11%), dubbed the party of doctors and dentists campaigning for low tax and deregulation, have often shared power with both left and right over the past 70 years and could do so this time. The other two parties of significance, the radical Left, Die Linke, and the anti-immigrant far Right, AfD, are currently polling 6% and 11% respectively. No party is anywhere near the 50% mark to win outright, so the winners will need to build a coalition with others in order to form a majority.
With such a complex scenario, it’s not surprising that it always takes time for the horse-trading between parties to take place—last time it was 5 months—so Angela Merkel will in all likelihood remain Chancellor for months to come, possibly until early next year. Unless voting patterns change dramatically today, the most probable coalition will consist of three parties, cobbled together with shared interests. Current money is on the SPD and Greens forming a coalition, with possibly support from the Left if they fail to reach the combined magic 50%. After years of ruling out a partnership with the Left at the federal level, the SPD no longer excludes the possibility and the three parties already share power in some regional assemblies. Such a coalition, under the current favourite for Chancellor, Olaf Scholz from the SPD, would probably increase spending, loosen Germany’s tight fiscal rules and impose stricter labour regulations.
Germany’s relationship with India has mainly focused on trade, although during her time in office Merkel has made it clear that the Indian diaspora in Germany has made a major contribution to the country’s social and economic development, given their high level of education, high income and stable migration status. It was not insignificant, therefore, that her final visit to New Delhi in October 2019, one of her last major international visits before the pandemic struck, had the specific goal of deepening and consolidating a relationship that had grown in importance since she became Chancellor in 2005. The facts speak for themselves. More than 1,700 German companies are active in India and provide some 700,000 jobs in the country. There are also hundreds of Indian businesses active in Germany, which have invested billions of euros in pharmaceuticals, information technology and the automotive industries. All this adds up to Germany being India’s largest trading partner in Europe. The number of Indians resident in Germany doubled from around 46,000 to approximately 100,000 between 2009 and 2016, and in the academic year 2019-20, there were more than 25,000 Indian students enrolled in German universities
But there’s much more to be done. The long and unsuccessful pursuit of a free trade agreement (FTA) between the EU and India has come to be seen as a major issue and a symbol of the unfulfilled promises of the relationship. The good news came back in May when, at a virtual summit, the EU and India agreed to resume the negotiations, stalled since 2013, on a potential FTA and seek closer cooperation to combat climate change. Why the new German Chancellor is so important is that, in reality, Europe’s future does not lie in Brussels, it’s determined largely by what Germany and France do together. And as Germany is by far the largest economy in the EU, the views of Germany’s Chancellor tend to dominate. A 2020 study by the European Parliament put the benefits of a trade deal for the EU and India at up to $10.2 billion, so there is every incentive to agree an FTA, which will be a high priority for the new chancellor.
But of course the elephant in the room is China. The leader of the Greens, Annalena Baerbock, has repeatedly called for a tightening of the German and European trade policy towards China and the imposition of higher tariffs on imports from China. “We have to uphold standards when there is dumping”, she declared recently. Unlike Merkel, who was always reluctant to be seen acting against China, Baerbock strongly favours keeping China’s Huawei Technologies out of Germany’s 5G network as a “security issue”. With an overall trade volume of 586 billion euros in 2020, China has been the EU’s largest trading partner with almost half of the EU’s exports, totalling 202 billion euros, coming from Germany. Angela Merkel has always favoured increasing trade with China, regardless, but the new coalition is likely to take a firmer stand on its own core western values when interacting with the Chinese side, a policy unlikely to be welcomed in Beijing.
Perhaps the most important foreign policy issue on the desk of the new Chancellor, which will be closely followed in New Delhi, is Germany’s development of its Indo-Pacific strategy, adopted last September. This will be novel for Germany as it’s likely to mix trade and security issues for the first time. The new strategy focuses on areas where Germany wants to expand cooperation with the region, such as international security, tackling climate change, strengthening multilateralism and promoting the rule of law and human rights. If Merkel is succeeded either by Scholz or Laschet, the continuity candidates, it is likely that these policies will be watered down for fear of offending China. Merkel always shunned the big decisions that demanded a strategic philosophy that defined the kind of long-term relationship with China. Annalena Baerbock, however, has no such qualms and if she becomes Chancellor, or plays a leading role in the new government, Xi Jinping might privately throw a tantrum. Germany’s Indo-Pacific strategy would then become very interesting for New Delhi.
John Dobson is a former British diplomat, who also worked in UK Prime Minister John Major’s office between 1995 and 1998.