The AfD is spooking investors in Germany. Food for thought for Meloni on Vannacci

Yesterday, the Financial Times published an interview with German Economy Minister Katherina Reiche, who warned that the rise of the far-right AfD party risks “raising concerns” amongst foreign investors. Reiche went on to dismiss the party’s programme as a “wild mix” containing “socialist elements”. But the timing of this warning is no coincidence, for two reasons. The first is that on 19 October, Berlin will host its first investment summit, through which the Merz government aims to attract at least 3,750 billion euros of private capital by 2040. Up to 200 investors are expected to attend, ranging from David Solomon of Goldman Sachs to Larry Fink of BlackRock. The second reason is that, a few weeks before the event, in September, elections will be held in both Saxony-Anhalt and Mecklenburg-Western Pomerania, two former East German Länder – and in the former, polls suggest the AfD is close to an absolute majority.

The party is calling for the ‘remigration’ of foreigners, withdrawal from the euro and a breakaway from the European Union, and an end to industrial and climate policies. Yet those two Länder need precisely what these policies risk driving away: immigrants and capital. According to calculations by the Bertelsmann Stiftung, Saxony-Anhalt will lose 322,000 inhabitants by 2040 (not to mention that its median age will rise to 52.1 years, compared with the German average of 47.1). Furthermore, a study published a few weeks ago by the DIW, a Berlin-based economic research institute, estimates that the AfD’s migration policies would reduce the number of foreign arrivals in the state by between 45 and 65 per cent per year, in a part of the country – the eastern Länder – where foreign workers generate 24.6 billion euros in added value, according to the IW, the German industry research centre. A report commissioned by businesses from the ifo Institute for Economic Research in Dresden reaches a similar conclusion: with low levels of investment, a shortage of workers and an ageing population, there is a risk of falling behind the rest of the country in terms of economic growth. Indeed, all these promises made by the AfD to investors come at a price – or rather, they represent a risk. In a survey of German listed companies cited by the IW, 92 per cent regard populism as a competitive disadvantage for Germany, and 76 per cent see the rise of the AfD as a direct threat to the country’s strength as an exporting power.

All this should also give the Italian majority and Prime Minister Giorgia Meloni’s party pause for thought. Over the past three years, the markets have rewarded the government’s fiscal prudence, and the spread between BTPs and Bunds – currently at 78 basis points – remains at a 15-year low. Meanwhile, Roberto Vannacci’s Futuro Nazionale (which describes itself as “not an accountant” when asked about economic policy) holds views not too dissimilar to those of the AfD and has risen in the polls above the Lega, to the extent that only by adding its votes would the centre-right surpass the broad coalition in 2027. The lesson from Germany is that investors analyse party manifestos before the election results are known. And as long as the General remains outside the coalition, it will primarily be an electoral problem for Meloni. Otherwise, look again at the German case.