A Political Defeat That Might Turn into an Opportunity

At first glance, failing to clear the five-percent hurdle in the 2025 Bundestag election seems like a catastrophic defeat for the FDP. Having lost significant support as a junior partner in the previous traffic light coalition, the party could not recover from its downward trajectory. However, when considering the political and economic realities of the new legislative period, it becomes clear that this setback might have saved the FDP from an even greater disaster.

The Trap of a Germany Coalition

Had the FDP passed the parliamentary threshold, it could have been drawn into a so-called Germany coalition with the CDU and SPD. Yet, while the FDP had insisted on strict adherence to the debt brake during its time in the traffic light government, major shifts in CDU financial policy are now becoming apparent. While Friedrich Merz campaigned on promises of strict fiscal discipline, it is now evident that a CDU-led government is willing to take on even more debt than the traffic light coalition had considered before its collapse. This would have placed the FDP in a dilemma: on the one hand, it would have had to uphold its economically liberal principles and continue advocating for fiscal stability; on the other hand, it would have faced two much larger coalition partners with no real interest in strict budget discipline.

A Weak Position in Government or a Stronger One in Opposition?

This situation would not only have minimized the FDP’s political influence within the coalition but would also have set it up as a scapegoat for an inevitable financial crisis. If in government, the FDP would have either been a powerless voice of caution or a compromising partner sacrificing its credibility. In both scenarios, the long-term damage to the party would have been enormous. However, by remaining outside of the Bundestag, the FDP now has the chance to rebuild in opposition and redefine itself as a credible force for fiscal responsibility and economic expertise.

Implications for Germany’s Credit Ratings

Conclusion: A Hidden Advantage for the FDP

In retrospect, the FDP’s failure to surpass the five-percent threshold may turn out to be a hidden advantage. The party is spared the burden of participating in an unrealistic coalition and can use its opposition role to sharpen its positions. Meanwhile, Germany faces an economic crossroads that could put long-term strain on the financial system. Whether the new government will manage to balance necessary investments with fiscal stability remains to be seen—but one thing is certain: the FDP will not be held responsible for any potential missteps.