The state elections in Saxony-Anhalt could profoundly change the political landscape in Germany. The AfD with its top candidate Ulrich Siegmund is stable at over 40 percent in surveys. If Prime Minister Sven Schulze (CDU) fails to organize a majority or a minority government, the right-wing populists will take over the leadership of the federal state.
One thing is already certain before the election on Sunday: the challenges for the next state government are tough. The economy is stagnating, the working population is shrinking and public debt is increasing. This applies to Germany as a whole. However, in the official statistics, Saxony-Anhalt is in one of the lowest places in almost every category.
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Since the corona pandemic, the economy in Saxony-Anhalt has been shrinking. Of all the states in Germany, only Saarland has developed worse since 2019. The average age of the population is higher than in all other federal states. The debt of the state and municipalities relative to economic power is only higher in Bremen and Saarland. The list goes on.
Energy-intensive industry dominates
The weak economic development in recent years is primarily due to the problems in the energy-intensive industry. The chemical industry dominates in Saxony-Anhalt and is under pressure from high energy and raw material costs. The weak domestic economy is putting pressure on demand, while competition from Asia is growing.
The automotive supply industry, which is strongly represented in Saxony-Anhalt, is in similarly dire straits. The transformation from combustion engines to electric motors poses major challenges for the industry. In addition, the supplier country Saxony-Anhalt is heavily dependent on Volkswagen. The crisis at VW is plunging many companies into existential hardship.
The roots of the structural problems go back a long way: immediately after the fall of the Wall, the decision was made to maintain the chemical sites. In view of the distortions on the labor market, it was the right thing to do, but it cemented the weight of the business location. The attempt to redistribute them by setting up the American chip manufacturer Intel in Magdeburg failed. Despite promised billions in subsidies, the planned factory will not be built.
Corona emergency continues
And then there is the demographic cliff that Saxony-Anhalt is heading towards. Since 1990 the population has shrunk by more than a quarter. In no other East German federal state was the bloodletting greater. Today, not only are the emigrants from back then missing, but also their children and grandchildren.
The scope for maneuver in budgetary policy has shrunk over many years. Between 1994 and 2002, two minority governments led by the SPD in the “Magdeburg model” were tolerated by the then PDS. That was particularly expensive. Even under the leadership of the CDU, sensible budget policy has rarely prevailed over the past 24 years. In December, the state government once again extended the Corona emergency for Saxony-Anhalt in order to be the only federal state to be able to use unused loan authorizations from the time of the pandemic in 2026.
If the AfD leads the next state government, in the first hundred days it wants, among other things, to terminate the state media treaty and begin deporting foreigners who are required to leave the country. This won't help the economy. The biggest long-term challenge for the business location is demographic change. Campaigning against “culturally foreign skilled workers” is exacerbating the labor shortage.
Growth requires immigration
Prime Minister Sven Schulze has announced that his first effort will be to draw up a budget if he is confirmed in office. This will be a challenge in every possible government constellation. The AfD's election program has a particularly high financing gap: economists estimate it at more than two billion euros.
The relevant framework conditions for the industry are not decided in Magdeburg. A Federal Council initiative to lift sanctions against energy imports from Russia, as announced by the AfD, will also come to nothing.
It would make more sense to quickly implement the administrative reform announced by Schulze and use it as an opportunity to make Saxony-Anhalt more attractive for settlements and new businesses. For more growth, the country not only needs immigration, but also the influx of new ideas.
