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‘Jein’ is a peculiar German word, a clever combination of Ja (yes) and Nein (no). ‘Jein’ is proving to be a very useful word for analysing German politics and is an appropriate answer to whether the energy crisis stopped the German 'traffic light' coalition in its tracks.
Germany’s ‘traffic light’ government coalition of three political parties fell apart in November 2024, and the country will vote for a new government on 23 February. The outgoing coalition comprises the Social Democrats (SPD), the Free Democratic Party (FDP), and the Greens—representing red, yellow, and green in the traffic light coalition. It was marred by profound ideological disagreements and was further strained by external events, including the weakness of the German economy and Russia’s invasion of Ukraine.
Energy prices link all these factors: ideology, economy, and the impacts of the invasion. The Russian invasion and pre-invasion energy market volatility led to natural gas prices skyrocketing, driving energy costs. German households panicked about high winter heating bills, while businesses blamed energy costs for their struggles to remain globally competitive. The German government has spent over 255 billion euros (or US$270 billion) on subsidies to cushion these impacts. This is equivalent to about 85 percent of the total budget of the US’ Inflation Reduction Act (IRA) provided for Energy Security and Climate Change investments.
German households panicked about high winter heating bills, while businesses blamed energy costs for their struggles to remain globally competitive.
Nonetheless, Germany’s story is not that simple. The economy has been slowing for many years, due to under-investment in software, infrastructure, and new products like electric vehicles. Geopolitics also play a role: notably, Donald Trump was announced as morning dawned in Berlin on November 6, and news of the coalition government’s disintegration emerged shortly after dusk that very evening. Since then, concerns around a political volte-face and unwelcome external “interference” have further complicated the impending snap-election.
The unravelling of the traffic light coalition has its roots in its own formation during the autumn of 2021. The Social Democrats (SPD), the Free Democratic Party (FDP), and the Greens were never a natural fit. While the SPD assumed the chancellorship, the FDP took up the Ministry of Finance, and although the Greens wanted the Ministry of Finance, they accepted the Ministry of Economy and the Ministry of Foreign Affairs. This necessitated a ‘coalition agreement’ that could encompass both a commitment—crucial for the FDP—not to challenge Germany’s ‘debt brake’ constitutional rule limiting the annual public deficit to 0.35 percent GDP and, at the same time, an ‘off-budget’ plan to reallocate 60 billion euros of COVID-19 funds to fund green investments that were crucial to the Green party.
This off-budget arrangement was shot down by Germany’s constitutional court in November 2023. From that moment onwards, the coalition deal was on the rocks, although it took another year of infighting, late-night crisis talks, and fiscal uncertainty before Chancellor Scholz finally dismissed the FDP Finance Minister, Christian Lindner. Since then, it has emerged that the FDP had plotted an exit from the coalition much earlier, aiming to collapse the coalition at the first opportunity.
Climate policy at a standstill: Will it finally get the ‘green’ light?
The Russian invasion exposed a long-ignored German and European dependence on cheap Russian pipeline gas. The country’s vulnerability was less than it might have been, due to a decade of energy transition investments in energy efficiency and renewable electricity generation. Nonetheless, Germany’s response to the 2022 energy crisis has focused on short-term ‘band-aid’ actions, not structural solutions. Although Europe has envied the Biden government’s Inflation Reduction Act (IRA) package of clean energy tax credits, the continent has spent a similar sum of money on price subsidies.
The climate and green energy agenda of the traffic light coalition has repeatedly run into political trouble. Several projects remain stalled, including the Power Plant Security Act, which would provide support for hydrogen-ready gas power plants, ‘contracts for difference’ that would cover companies for the added operational costs of transitional technologies, and a legally binding climate adaptation strategy. Additionally, the crucial Geothermal Acceleration Act, which would have eased the process of licensing new projects and implementing changes in mining law, water law, and nature conservation law—already at the parliamentary agreement stage—is also suspended. At best, the results can be called lacklustre and inconsistent. Only 9 out of 27 proposed policy measures were fully implemented.
The crucial Geothermal Acceleration Act, which would have eased the process of licensing new projects and implementing changes in mining law, water law, and nature conservation law—already at the parliamentary agreement stage—is also suspended.
This situation is mirrored at the European level, where the climate-action-oriented ‘Green Deal’ policies are now being repackaged as an economic ‘clean competitiveness’ agenda.
The prospects for energy transition both in Germany and the EU now depend on the coming election. Current polls suggest that the Christian Democratic Union/Christian Social Union (CDU/CSU) alliance may regain power, which could shift Germany's climate strategy. Although the conservative CDU initiated landmark climate legislation during Angela Merkel's tenure, they have since opposed several ambitious climate measures proposed by the SPD and Greens. In fact, the complexion of the CDU of 2025 has changed significantly. Friedrich Merz’s recent decision to vote with the far-right Alternative for Germany (AfD) on a proposed immigration law left many astonished as it broke a “postwar taboo.” Merz has since come under fire from Angela Merkel, who couldn’t “remain silent” on an issue of such fundamental importance, as protests filled the streets of Germany. The CDU and Merz have also dropped in the polls, further complicating the imminent snap election. The polls suggest that the CDU/CSU will need a coalition partner to secure a parliamentary majority.
Will that partner be the SPD—the traditional ‘grand coalition’ of German politics—or will Merz, the CDU leader, break the party’s long-standing commitment to not work with Germany’s populist and neo-fascist far-right Alternative for Germany (AfD)?
If neither of these options emerges from the vote, there is also a significant possibility that the CDU/CSU will have to strike a deal with the Greens and their leader Robert Habeck. This time, Habeck would likely insist on securing the Finance Ministry portfolio and pushing on a debt-brake reform.
The Greens recently conducted an election rally in the “wealthy and deeply conservative” city of Munich. Habeck’s unusual choice of venue indicates a willingness to display that he is “pragmatic and ready to reach out to new voters while pushing back against the image of the Greens as meddlesome and dogmatic peddled by political opponents.”
When Germany’s President Steinmeier announced the decision to go forward with the snap elections in February, he said, “The people are waiting expectantly for viable decision-making for Germany, as our country needs to assert itself during difficult times.” Although he did not mention energy, no one in Germany doubts that energy will play a critical role in these difficult times.
Krishna Vohra is a Research Assistant with the Centre for Economy and Growth at the Observer Research Foundation
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