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‘Jein’ is a peculiar German word—a clever combination of Ja (yes) and Nein (no), meaning both at the same time. It is proving to be a useful word for analysing German politics and perhaps is the best answer to questions about the role of rising energy prices in German and European politics today.
Germany’s ‘traffic light’ government coalition of three political parties collapsed in November 2024, and the country will vote for a new government on 23 February 2025. The outgoing coalition consisted of the Social Democrats (SPD), the Free Democratic Party (FDP) and the Greens, together representing red, yellow, and green in the traffic-light coalition metaphor. The government was plagued by many profound ideological disagreements and challenged by external pressures, including the weakness of the German economy and the Russia-Ukraine conflict.
German households panicked over soaring winter heating bills, while businesses blamed energy costs for their struggles to remain globally competitive.
Energy prices link all these factors: ideology, economy, and the impacts of the war. The Russia–Ukraine war and the energy market volatility leading up to it, beginning in summer 2021, caused natural gas prices to skyrocket, driving up electricity costs. German households panicked over soaring winter heating bills, while businesses blamed energy costs for their struggles to remain globally competitive. The German government has spent at least €255 billion (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.
Nonetheless, Germany’s story isn’t quite that simple. The economy has been slowing for many years as a result of under-investment in software, infrastructure, and new products such as electric cars. Geopolitics plays a key role as well: it is no coincidence that Donald Trump’s victory on 6 November 2024 was announced as soon as morning dawned in Berlin, with the news of the coalition government’s disintegration following it swiftly by dusk on the same evening.
More than anything else, the unravelling of the traffic light coalition has its roots in its formation during autumn 2021. The coalition of the SPD, the FDP and the Greens was uneasy right from the beginning. 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 Ministry of Foreign Affairs instead. This necessitated a ‘coalition agreement’ which would encompass both a commitment—crucial for the FDP—to not challenge Germany’s ‘debt brake’ constitutional rule limiting the annual public deficit to 0.35 percent of Gross Domestic Product (GDP), and, concurrently, a budget manoeuvre plan to reallocate €60 billion of COVID-19 funds to fund green investments that were crucial to the Greens.
German households panicked over soaring winter heating bills, while businesses blamed energy costs for their struggles to remain globally competitive.
This unusual budget arrangement was shot down by Germany’s constitutional court in November 2023. This impacted the integrity of the coalition deal, which now rested on rocky ground. However, it took another year of infighting, late-night crisis talks, and fiscal uncertainty before Chancellor Olaf Scholz finally dismissed the FDP Finance Minister, Christian Lindner. Since then, subsequent reports have speculated that the FDP had been plotting an exit from the coalition since much earlier, constantly seeking out opportunities to collapse the coalition government at the first sign.
Climate policy at a standstill: Will it finally get the “Green” light?
The Russian-Ukraine war 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 expressed its envy towards the Biden administration’s IRA package of clean energy tax credits, it has spent nearly a similar sum on energy price subsidies.
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.
Meanwhile, the green climate and energy agenda of the traffic light coalition has repeatedly run into political trouble. In 2023, the Minister of Energy was forced to resign over an appointment scandal exploited by fossil energy opponents. The results can be termed lacklustre and inconsistent, at best. Only 9 out of 27 proposed policy measures were fully implemented.
Several projects remain stalled, including the Power Plant Safety 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, aiming to ease the process of licensing new projects whilst implementing changes in mining law, water law, and nature conservation law, has also been suspended, despite reaching the parliamentary agreement stage.
The aforementioned situation is mirrored at the European level as well, where the climate-action-oriented ‘Green Deal’ policies of 2019–24 are now being repackaged as an economic ‘Clean Competitiveness’ agenda.
The prospects for energy transition in both Germany and the European Union now depend heavily on the upcoming elections. Ongoing polls forecast the return of the conservative Christian Democratic Union and Christian Social Union (CDU/CSU) alliance, hinting at a significant shift in Germany’s future climate strategies. Although the conservative CDU initiated landmark climate legislation during Angela Merkel’s tenure, they have come to oppose several ambitious climate measures proposed by the SPD and the Greens since then. In fact, the complexion of the CDU of 2025 has changed significantly. Merz’s recent decision to vote with the far-right Alternative for Germany (AfD) on a proposed immigration bill left many astonished by “breaking a postwar taboo”. Angela Merkel publicly criticised Merz as well, stating she couldn’t “remain silent” on an issue of such fundamental importance while protests erupted across 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 make up a parliamentary majority.
Ongoing polls forecast the return of the conservative Christian Democratic Union and Christian Social Union (CDU/CSU) alliance, hinting at a significant shift in Germany’s future climate strategies.
Will that partner be the SPD, the traditional ‘grand coalition’ of German politics, or will the CDU leader, Friedrich Merz, break the party’s long-standing commitment not to work with Germany’s populist and neo-fascist far-right AfD?
If neither of these options emerges from the vote result, there is also a significant possibility that the CDU/CSU will have to enter a coalition agreement with the Greens and their leader, Robert Habeck, who is personally much more popular with German voters than Merz. This time, Habeck would likely insist on securing the Finance Ministry portfolio and pushing for a reform of the debt brake.
The Greens recently conducted an election rally in the “wealthy and deeply conservative” city of Munich. Habeck’s unusual choice of venue signals his intent to demonstrate 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 Steinmeyer announced the February snap elections, he stated, “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 explicitly mention energy, few in Germany doubt that energy remains central to the nation’s current set of challenges.
Krishna Vohra is a Research Assistant with the Centre for Economy and Growth at the Observer Research Foundation
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