Germany´s government formation: coalition talks of the Traffic Light Alliance

Hardly any federal election in recent history has been as exciting as the one in 2021. In the run-up to the elections on 26 September 2021, the polls were forecasting either the CDU/CSU or the Greens as potential winners, but both had to give way to the Olaf Scholz-led SPD in the end.

With 22.5 % of the first vote, the CDU achieved by far its worst result in a federal election, while the SPD improved on its performance in the last election, winning 26.4 % of the first vote. The Greens were also on an upward trend, finishing the race for the chancellorship as the third strongest party with 14.0 %. While there was also a significant improvement for the FDP with 8.7%, the Left could only take 5.0%, just enough to enter the 20th German Bundestag.

Image: BATO Group

According to the final results of the Federal Election Commissioner, the distribution of seats in the Bundestag is as follows:

  • SPD: 206
  • CDU/CSU: 197
  • Grüne: 118
  • FDP: 92
  • Linke: 39
  • AfD: 83
  • SSW: 1

The results would potentially allow five coalition options that would achieve a majority of the Bundestag seats:

  1. black-red-green coalition
  2. black-red-yellow coalition
  3. traffic-light-coalition
  4. Jamaica coalition
  5. grand coalition

But unlike in the last Bundestag election, this time it looks like the new government could be formed fairly quickly and the country could soon be led by the so-called traffic light coalition of SPD, Greens and FDP for the next four years. The three parties in question have already completed their exploratory talks with a recently presented paper (Sondierungspapier) and already entered the negotiations on forming a government.  All negotiation partners expressed their strong willingness to overcome existing controversies and come to a mutual agreement, i. e. coalition paper by the end of November.

In this article, we look at the detailed ideas of the parties for the announced renewal of the country that can be found in the exploratory paper. The tripartite alliance has divided the results of the exploratory talks into a total of ten topics:

Push for affordable and sustainable construction and housing

The potential coalition partners agreed that the current housing market is not capable of providing affordable rents as a result of severe housing shortage.  Therefore, affordable housing is to be built with 400,000 new residential units per year. A quarter of the new housing stock are to be publicly subsidised. A dedicated "Affordable Housing Alliance" would be responsible for the implemenation of the project.

The cost of housing construction is to be reduced through digitalisation and the removal of red tape, as well as serial construction and standardisation. In addition, climate protection in new construction is to be strengthened and energy-efficient refurbishment of existing buildings accelerated.

Furthermore, the federal states are to be given the option to make the land transfer tax more flexible, which is intended to promote the purchase of owner-occupied housing.

Promoting innovation and new competitiveness

Germany as a business location should become more competitive. The aim is to achieve sustainable growth, prosperity and a high level of employment. The key idea is to create a new confidence in the spirit of entrepreneurship and innovation.

In this context, it is planned to reduce bureaucracy in the promotion and financing of innovation and to provide more support for founders and start-ups.

In addition, the potential new government wants to support small and medium-sized enterprises and craft enterprises and to create future-oriented framework conditions for greater competitiveness. Specifically, it is planned to increase expenditure on research and development to 3.5 % of the gross domestic product.

The modern world of work

The exploratory paper states that trade unions and workers should to be supported in enabling flexible working hours models. The aim is to respond to the changes in the world of work and to respond to the demand of employees and companies for a more flexible organisation of working hours.

The plan is to raise the statutory minimum wage to 12 EUR/hour. In addition, the conditions for mini- and midi-jobs are to be improved, with main aim in mind to remove obstacles that currently make it difficult to take up employment that is subject to compulsory insurance.

Self-employment is also to be promoted by providing better support for start-ups and reducing unnecessary red tape. At the same time, the protection of the self-employed and the solo self-employed is to be improved.

Climate protection

In tackling the climate crisis, the exploratory partners see opportunities for Germany as an industrial location. New business models and technologies could create climate-neutral prosperity and good jobs.

In this context, it is a joint and central task to bring Germany onto the "path" of 1.5 °C (maximum global warming) in accordance with the Paris Climate Agreement and the decision of the Federal Constitutional Court.

Accordingly, the Climate Protection Act should be consistently developed further and an emergency climate protection programme should be launched. All sectors of transport, construction and housing, industry and agriculture, as well as power generation, must make their contribution.

The decentralised expansion of renewable energies is to be dramatically accelerated and strengthened. In future, all suitable roof surfaces are to be used for solar energy generation. This is to become mandatory for new commercial buildings and the rule for new private buildings.

The three parties also describe the phase-out of coal-fired power generation by 2030 as "ideal". In addition, they want to abolish the EEG levy as a component of the electricity price in the course of the legislative period. Furthermore, Germany is to become the lead market for electromobility.

Modern state, digital awakening

Germany's modernisation requires fast administrative, planning and approval procedures. Accordingly, the duration of procedures for private and state investments should be at least halved.

In addition, a more agile and digital administration is desired. In this context, laws are to be subjected to a digitalisation check, and the federal government's digital policy strategy is to be relaunched. This involves the topics of AI strategy, data strategy and blockchain strategy as well as the dedicated gigabit expansion.

In order to create good living conditions in cities and in rural areas, the aim is to strengthen data provision, especially at the rural level. The goal is to create fast internet, good transport connections and a good infrastructure from shopping to sports.

Social security

In order to strengthen the statutory pension, the minimum pension level is to be secured at 48 per cent. In addition, the parties speak against pension cuts and raising the statutory retirement age. The potential new government wants to partially fund the statutory pension insurance.

The private pension system is to be fundamentally reformed. In this context, the offer of a publicly accountable fund with an effective and low-cost offer with the possibility of opting out is being examined. The legal recognition of private investment products that promise higher returns than the Riester pension is also being examined.

The current basic support ("Hartz IV") is to be abolished and replaced by a citizen's income that respects the dignity of the individual, enables social participation. It should be digitally and easily accessible.

In addition, the return to the labour market is to be placed at the core of the system. In this context, additional income opportunities are to be improved in order to increase incentives for proper employment.

Opportunities for children and strong families

Children and young people are to be given better opportunities regardless of their parents' social situation. In addition, strong children's rights are to be anchored in the Basic Law in the future.

In addition, further education is to be improved so that any vocational qualification can be obtained at any time. Furthermore, there are to be new instruments to support lifelong education and training. In addition, the student loan BAföG is to be reformed while making it independent of parents´s income.

Freedom, security and diversity

The wage inequality between women and men is to be tackled as well as discrimination of women in the labour market, more diversity at work and more women in leadership positions.

In addition, the reconciliation of work and family life is to be improved.

Furthermore, the electoral law is to be revised. The aim is to prevent the growth of the German Bundestag. Furthermore, the voting age is to be lowered to 16 years when the German Bundestag and the European Parliament are elected.

Future investments and public finances

The constitutional debt brake forms the guard rails for the necessary future investments in climate protection, digitisation, education and research as well as infrastructure. In order to be able to draw down the funds provided, planning processes and approvals should be accelerated. In addition, investment security must prevail.

At the same time, there will be no new taxes on assets. The exploratory partners also rule out an increase in income tax, corporate tax and value-added tax. Instead, they want to stimulate the economy by super write-offs for investments in climate protection and digitisation.

The creation of a financial leeway for the necessary investments is to be realized by scrutinizing the state´s expensitures for ineffective and environmentally and climate-damaging subsidies as well as by closing tax loopholes such as in the case of share deals.

Responsibility for Europe and the world

Germany's responsibility is to further strengthen the European Union. Therefore, the foreign, security and development policy is to be made more value-based and more European. In addition, Europe's strategic sovereignty is to be increased.

The parties also want to diversify the energy supply for Germany and Europe, with European energy law also applying to energy policy projects in Germany.


Overall, the SPD, the Greens and the FDP are aware that Germany needs a new chapter. The parties believe that with their different perspectives they can bring together an innovative alliance to set the course for a decade of renewal that will be felt socially, ecologically, economically, digitally and socially.

The plan is very promising and ambitious. A coalition agreement is planned to be ready by the end of November and Scholz could be elected as chancellor as early as by mid of December.

Sources: Germany´s voting system explained  |  Der Bundeswahlleiter  | Ergebnis der Sondierungen zwischen SPD, BÜNDNIS 90/DIE GRÜNEN und FDP