If there is one thing that can be extrapolated from 2024, it is that the wind can change dramatically in politics.
This year Keir Starmer won a historic election in the UK for the Labour party. Labour entered government with a “super-majority” and vowed to hit the ground running. It now looks as if it has only hit the ground.
Starmer’s approval rating is at rock bottom — and the UK’s story is only one in which public opinion has moved fast and broken things this year.
The election of Donald Trump, the chaos that has ensued from France's snap election and the rise of the far right to positions of government in German states all provide examples.
There is no reason to rule out the unthinkable happening in Germany’s federal parliamentary election next year.
It is unlikely that the far right AfD, led by Alice Seidel (pictured), will form part of the next governing coalition. But that doesn’t mean it can’t cause a political upheaval.
If the AfD and other extremist parties gain enough success in February, it is possible they could pool their votes and prevent fiscal reform.
Michel Barnier could not survive a vote of no confidence in his French premiership, thanks to a coordinated rejection by both extremes of the French political spectrum.
AfD and the nominally left wing but pro-Putin party BSW could gain enough votes to block the two thirds majority required to reform Germany’s debt brake.
The economy could remain in limbo and political fallout could ensue.
At the moment AfD is only polling at 19% and BSW 7%, according to Yougov. But with how capricious politics is in the modern day, that could be very different two months from now.
A vote blocking debt brake reform would clearly not threaten to bring higher issuance of Bunds — quite the opposite. But it would entrench the structural economic problems in Germany and point to a country with no practical ability to make policy.
These are all things credit rating agencies care about, and they should.
If Germany doesn’t sort itself out, its political and economic situation will only deteriorate further and eventually this will have repercussions for its credit quality.