Germany's far-right and far-left political parties are likely to gain more support in next year’s early general election, driven by public frustration over persistently high inflation and challenging economic conditions, a study published Wednesday predicted.
Inflation and growth have deviated significantly from expectations over the past three years, said Jonathan Federle, a researcher at the Kiel Institute for the World Economy (IfW) in Kiel.
"Overall, support for radical parties on the left and right is likely to have increased by two percentage points as a result," said Federle, co-author of the "Inflation Surprises and Election Outcomes" study of 365 elections in 18 industrialized countries between 1948 and 2023.
The result is that an inflation shock of 10 percentage points during a legislative period coupled with below-average growth in real wages leads to a 2.8 percentage point rise in the share of votes for populist and extremist parties in the following election.
Unexpected changes in gross domestic product (GDP) also increased their approval.
Conversely, positive surprises reduced the popularity: If growth is one percentage point higher than expected, the share of votes for radical parties falls by around 0.25 percentage points.
Wage increases also had a dampening effect.
If they offset the inflation shock, the increase in votes for parties on the left and right would only be 1.3 percentage points.
These results, therefore, apply to times of unexpectedly high inflation, such as the oil crisis of the 1970s or the price shock following the COVID-19 pandemic.
This also explains part of the popularity of Donald Trump in the U.S., as well as the far-right Alternative for Germany (AfD) and the left-wing populist Sahra Wagenknecht Alliance (BSW), said Federle.
Both German parties could score well in early parliamentary elections expected in February following the collapse of the coalition government under Chancellor Olaf Scholz last month.
Germany's annual inflation rate rose to 2.2% in November, up from 2% in October, marking the highest level in four months. The increase follows a 2% year-over-year increase in the cost of living registered in October.
"Extreme parties benefit when price increases are higher than expected and employees and other economic actors have not had the opportunity to prepare for inflation through appropriate wage increases," said Federle.
If inflation rises unexpectedly faster than real wages, this also increases dissatisfaction among the population.
Negative inflation surprises were found to have a significant influence on the number of demonstrations and strikes against government policy.
For example, the number of demonstrations increases by around 8% if actual inflation is one percentage point higher than expected.
Separately on Wednesday, the Organisation for Economic Co-operation and Development (OECD) trimmed its forecast for German economic growth next year due to political uncertainty and tight fiscal policy, while still anticipating stagnation this year.
The world's third-largest economy is expected to grow by 0.7% in 2025, down from a previously forecast 1.1%, after remaining flat this year.
The government had planned to implement several measures to revive economic growth, which, due to the coalition break-up, will likely not be adopted before the early elections.
For 2026, the OECD forecasts an acceleration of growth to 1.2%.
