Over the last two decades, the formation of grand coalitions has grown in the European Union (EU), even in countries with no previous political experience with them. Alongside a significant rise in both new and radical parties, grand coalitions signal the increasing fragmentation of contemporary European politics. We, therefore, investigate the electoral performance of both mainstream and new parties entering and leaving grand coalitions. We find that mainstream parties do not appear to enter grand coalitions after negative election results. They are, however, punished in the following elections, albeit not as heavily as previous findings have shown. This post-grand coalition electoral penalty is true for both major and minor grand coalition members. These findings contribute to the literature on party competition and provide insights into the choices mainstream parties' have been making in response to recent and rapid changes in the electoral landscape of the EU.

Are ‘grand coalitions’ – coalitions that include the two largest parties in a parliamentary system – good or bad for democracy? This article analyses that question in light of the recent rise of populist parties that large mainstream parties may try to exclude from government by forming grand coalitions with other large mainstream parties. I call this the ‘sterilization’ logic and note that mainstream parties’ ability to do this varies widely. Where parties have previously used grand coalitions primarily according to a ‘clientelistic’ logic – for example, Austria – mainstream parties may well be unable to rally the party system against insurgent populist challengers. Where mainstream parties have used grand coalitions exceptionally and for major institutional ‘renovations’ – for example, Germany – the grand coalition remains a viable option for responding to insurgent challenges, though this strategy is also quite risky. This article considers the implications for democracy by tracing recent developments in the context of the euro crisis and the European refugee situation. The major empirical referents are Austria and Germany – two countries with extensive experience and literature about grand coalitions – but the article draws out the implications of the analysis for other European parliamentary contexts.