AfD rise raises economic concerns ahead of German state votes
The rise of Germany’s far-right Alternative for Germany (AfD) ahead of three key state elections is raising concerns among economists and business groups over the country’s economic outlook, particularly its labor market, investment climate and export model.
Voters in Saxony-Anhalt will go to the polls on Sept. 6, followed by elections in Berlin and Mecklenburg-Vorpommern on Sept. 20. Recent surveys show the AfD among the strongest parties in all three states.
The party has made migration, housing and security central themes of its campaign, while critics warn that its economic and migration policies could worsen Germany’s shortage of skilled workers and discourage investment.
Labor shortages at center of debate
Germany is facing an aging population and a growing number of retirements, increasing pressure on employers to fill vacancies.
Economists cited in German media have warned that ending or sharply reducing migration could leave Germany short of as many as 7 million workers over the next 15 years.
Migrants already play a significant role in regional economies. In eastern Germany, they are estimated to account for about 11% of economic output, while foreign workers represent a substantial share of employment in sectors including food production, construction, hospitality and logistics.
In Saxony-Anhalt, immigrants account for between 33% and 40% of workers in several of those sectors. About one in five doctors in the state is also a foreign national, according to the assessments.
Reint Gropp, president of the Halle Institute for Economic Research, warned that an AfD-led government could weaken state economies.
“In a state governed by the AfD, annual economic growth could fall by between 0.5% and 1%,” Gropp said.
AfD euro policy seen as major risk
Economists have also focused on the AfD’s opposition to the European Union and the eurozone.
Analysts say a Brexit-style withdrawal could severely affect Germany’s export-oriented economy. Estimates cited in German media put potential losses at about €700 billion over five years, with as many as 2.5 million jobs at risk.
Saxony-Anhalt could be particularly exposed because of its economic structure. Under such a scenario, household incomes in the state are projected to fall by more than 6%.
Critics also warn that proposed AfD tax and pension policies could create a large financing gap, while its opposition to renewable energy could increase Germany’s dependence on external energy supplies.
Investment concerns
The AfD’s rise has also prompted concerns over Germany’s investment climate.
Analysts say political instability or weakening of democratic institutions could affect investor confidence. Surveys cited in the assessments indicate that 93% of German companies consider the rule of law their most important investment criterion.
The AfD has rejected many of Germany’s existing migration and climate policies, while calling for major changes to the country’s relationship with the EU.
Berlin vote could reshape politics
In Berlin, the AfD is currently polling third at about 17%, according to an INSA survey.
The governing coalition of Chancellor Friedrich Merz’s Christian Democratic Union and the Social Democratic Party is under pressure, while a possible coalition involving the Left Party, Greens and SPD could emerge after the Sept. 20 election.
The AfD has made Berlin’s housing shortage a central campaign issue and has called for social housing to be prioritized for local residents.
Saxony-Anhalt in focus
The AfD is strongest in Saxony-Anhalt, where it is polling at about 42%, ahead of the CDU at 22% and the Left Party at 13%.
The party is seeking to govern the state alone, although other parties have maintained their policy of refusing cooperation with it.
Saxony-Anhalt is among Germany’s economically weaker states, with GDP per capita about 14% below the national average.
The state also faces rapid demographic change. Forecasts indicate its working-age population could decline by 13% over the next decade, while the population aged over 67 is expected to increase by 8%.
‘Hot political autumn’
Carsten Brzeski, global head of macro research at ING and chief economist for Germany, described the period ahead as “Germany’s hot political autumn.”
Brzeski said the state elections would serve both as regional contests and as a test of the federal government’s popularity.
He warned that poor results for Merz’s coalition could increase political instability and potentially trigger an early end to the government.
Brzeski also criticized the AfD’s economic program, saying its financing plans contain significant gaps.
Citing an analysis by the Halle Institute for Economic Research, he said the party’s proposals could create an annual financing requirement of about €2.5 billion, while identified savings would amount to only €243 million.
“The resulting deficit of at least €2.2 billion corresponds to one-quarter of the state’s total tax revenues,” Brzeski said.
The elections will therefore be closely watched not only for their political impact but also for what they signal about Germany’s ability to address labor shortages, revive growth and maintain investor confidence.
Source:AA
