Germany, Europe's largest country and the forth largest economy in the world, is holding national elections tomorrow. Political change in a country of Germany's size is always significant, but since Germany is the main lever that moves the eurozone as a whole German politics punches above its weight. But German political institutions and election law work very differently from the ones we have in the United States, so a lot of the coverage in the U.S. press doesn't do a very good job of clarifying what's at stake.
The key facts:
1. There is no uncertainty whatsoever about the winner: Polls are unambiguous that Chancellor Angela Merkel is popular and that her Christian Democratic Party (CDU, known as the Christian Social Union in the province of Bavaria) will win the most votes and hold the largest number of seats in parliament. She will serve for a third term as Chancellor.
2. Merkel's party definitely won't have a majority in parliament: The German electoral system makes parliamentary majorities essentially impossible to obtain. Even Adolf Hitler needed a coalition partner to become Chancellor. The real uncertainty in tomorrow's race is about who Merkel's coalition partner will be.
3. The current coalition's chances of re-election hinge on the FDP: Right now Germany is governed by a coalition between the Christian Democrats and a party called the Free Democratic Party (FDP), a small business-oriented libertarianish party that has always been the CDU's officially preferred coalition partner. For a variety of reasons, the FDP's popularity has sunk considerably since the last election. The crucial issue is whether the FDP will obtain the 5% of the vote it needs to qualify for proportional representation seats in the German parliament. The 5% rule creates an odd discontinuity in election outcomes. If the FDP qualifies, the incumbent coalition will have a comfortable majority. If it doesn't, they'll be far short.
4. If the FDP fails, we'll probably get a "grand coalition": During her first term in office, Merkel headed a "grand coalition" between the CDU and the Social Democratic Party, the main center-left labor-oriented party. Acting as junior partner to Merkel was bad for the SPD's public standing in many ways and seems to have contributed to a tendency for SPD voters to drift either to the Green Party or to the further-left Die Linke party. On the other hand, the chance to serve in coalition and influence policy directly is very tempting. If the FDP falls short, this is the most likely outcome.
5. But Merkel will have other options: The CDU has never served in coalition with the Green Party at the national level. But it has happened in state government, and Merkel has taken a strong tilt against nuclear power during her current term in office which lays some conceptual groundwork for a "black-green" coalition. At a minimum, this possibility would give her some leverage in negotiations with the SPD.
6. A "grand coalition" is probably better for the world: The main German parties do not have America-style sharp ideological disagreements on economics issues, but an SPD entry into government would probably add to the current pressures on German firms to raise wages. Higher German wages and a more rapidly unraveling of German's low-wage export-driven growth strategy would be in the interests of German wage-earners, but also of other people around the world. Higher German earnings would lead to more demand for foreign-made goods and services and also create more opportunities for French or Spanish workers to compete for jobs on the basis of pay.
7. The German left faces formidable obstacles to returning to power: Beyond Merkel's personal popularity, the basic issue is the strength of Die Linke. This is a coalition of former East German Communist with left-wing West German Social Democrats who didn't like the party's turn to the center under Gerhard Schröder. In most western states, Die Linke gets very few votes and isn't a major factor in parliament so red-green coalitions can win. In eastern states, the Greens get very few votes and red-red coalitions can win. But western voters regard Die Linke as hopelessly tainted by association with East German communism so red-red or red-green-red coalitions are unthinkable in the west and therefore at the national level. In national elections, the combination of Die Linke strength in the east with its unacceptability in the west means it's very mathematically challenging for a left-of-center governing coalition to emerge. The SPD will either need to find a way to erode Die Linke's electoral strength or else to collaborate with its elected officials.