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AfD's rise in German elections raises fears of a 7-million-worker shortage
Ahead of state elections scheduled for September 6 in Saxony-Anhalt and September 20 in Berlin and Mecklenburg-Vorpommern, the AfD's rise is fueling debate over economic policy. Economists warn that halting migration could lead to a labor shortage of 7 million workers and significant growth losses over the next 15 years.
Germany's upcoming state elections have renewed debate over the possible economic consequences of the political rise of Alternative for Germany (AfD), which has gained prominence with its anti-immigration rhetoric. Economists say the party's anti-foreigner policies could shrink the labor market and weaken economic growth.
Polling stations are scheduled to open in Saxony-Anhalt on September 6 and in Berlin and Mecklenburg-Vorpommern on September 20. Recent polls place the AfD and The Left among the strongest political forces in some states.
AfD ranks third in Berlin with 17 percent
Political polarization is considered to have intensified in the capital ahead of the election. The coalition between the Christian Democratic Union (CDU), led by Chancellor Friedrich Merz, and the Social Democratic Party (SPD) is said to have lost support in the city.
Following the resignation of Berlin state premier Kai Wegner, the CDU selected Stefan Evers as its candidate. Evers's low public profile is among the factors adding to uncertainty over the election outcome. A three-party coalition of The Left, the Greens and the SPD is also among the options after the election.
An INSA poll placed the AfD third across Berlin with 17 percent support. The party links the city's housing crisis to immigrants and is campaigning for social housing to be allocated only to “locals.”
Migration policy poses risks to labor supply and growth
Assessments of the AfD's economic program suggest that a government led by the party could reduce economic prosperity and that its migration policies could widen the labor shortage. Scenarios involving withdrawal from the European Union and the eurozone could harm exports and create a budget deficit, while its energy policy could increase dependence on external suppliers.
Populist economic policies are estimated to reduce production by an average of 10 percent over the long term. This could cause an economic loss of approximately 450 billion euros in Germany, while damage to democratic institutions could also put international investment at risk. Ninety-three percent of companies consider the rule of law their most important investment criterion.
The AfD's rhetoric in favor of mass deportations and against migration could deepen the labor crisis in Germany, whose population is aging. If migration stopped, the country could face a labor shortage of 7 million workers over the next 15 years.
Immigrants are said to contribute 68 billion euros, or 11 percent, to the gross domestic product of eastern Germany, and 572 billion euros, or 14 percent, to Germany's overall GDP. In Saxony-Anhalt, immigrants account for between 33 and 40 percent of workers in food production, construction, hospitality and logistics. One in every five doctors working in the state is a foreign national.
Risk of leaving the EU and eurozone
The AfD's policy of leaving the European Union and eurozone in a move resembling Brexit is considered a major risk to Germany's export-driven economy. Such a withdrawal is estimated to cause losses of 700 billion euros within five years and put 2.5 million jobs at risk.
Under this scenario, household incomes in Saxony-Anhalt could fall by more than 6 percent. The AfD's tax and pension pledges could create a budget gap of 180 billion euros, while its proposed tax system would benefit high-income groups rather than lower-income sections of society.
The party's climate policies, which oppose renewable energy and envisage renewed dependence on Russian gas, could also increase Germany's external energy dependence and vulnerability.
AfD seeks to govern Saxony-Anhalt alone
In Saxony-Anhalt, where elections are expected to be held on September 6, the AfD leads the polls with 42 percent support. The CDU stands at 22 percent and The Left at 13 percent. The SPD, Greens, Free Democratic Party (FDP) and Sahra Wagenknecht Alliance (BSW), each polling around the 5 percent threshold, face the risk of failing to enter parliament.
While other parties continue to pursue political isolation of the AfD, the party aims to form a government on its own in the state. In Saxony-Anhalt, one of Germany's economically disadvantaged states, GDP per capita is 14 percent below the national average.
The state's working-age population could decline by 13 percent over the next 10 years, while the population over 67 could rise by 8 percent. A possible defeat in the elections could increase internal party pressure on Chancellor Friedrich Merz and cause political gridlock in Berlin.
Experts warn of slower growth and a budget deficit
Reint Gropp, president of the Halle Institute for Economic Research, said state economies could suffer significant damage if the AfD came to power. Gropp said anti-foreigner policies were economically destructive and that annual economic growth in a state governed by the AfD could fall by between 0.5 and 1 percent.
Carsten Brzeski, head of ING Global Macro Research and chief economist for Germany, said the state elections could shake up federal politics and produce consequences extending to the premature end of the current coalition government. Brzeski said the government's slow pace in implementing structural reforms to revive the stagnant economy was fueling the rise of the far right.
Brzeski described the AfD's economic policy as a program with unpredictable consequences and contradictions among its pledges. In its cost analysis of the election program, the Halle Institute for Economic Research (IWH) calculated that the AfD would create an annual financing requirement of approximately 2.5 billion euros, while its verifiable savings pledges amounted to only 243 million euros.
Under this calculation, a financing gap of at least 2.2 billion euros would emerge. The gap amounts to one-quarter of the state's total tax revenues, even as the AfD continues to rise in the polls.
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