Though Merkel’s victory is very impressive and cements her now unassailable position within the CDU, paradoxically, it might be quite difficult for her to form a coalition. The political reality dictates that compromises will have to be found, which means Germany’s policies are likely to shift slightly to the left.
Her previous coalition partner, the FDP, has suffered a historic setback and will not be represented in the new parliament for the first time since the founding of the Federal Republic. Having lost two-thirds of their voters, the Liberals will have to fundamentally re-invent themselves.
Moreover, both the Social Democrats and the Greens will be reluctant to form a coalition with her. The Social Democrats feel that the last Grand Coalition with Merkel from 2005 to 2009 lost them support from their core voters. The SPD would perhaps be more comfortable in opposition, and is therefore negotiating from a position of relative strength; Merkel needs SPD support more than the SPD needs her. The Greens have also learned from past experience in state governments that coalitions with the Christian Democrats can alienate the left-leaning part of their support base. Furthermore, a coalition with the Greens would have difficulty passing legislation in the Bundesrat (the Second Chamber) as a CDU-Green coalition would not enjoy a majority.
What next for Europe?
In terms of the euro crisis, much depends on who will actually partake in the final coalition. The Green party has been much more euro-friendly and critical of Merkel’s austerity-focused recovery strategy than the Social Democrats, calling for a debt-redemption pact and a symmetric adjustment of current account imbalances alongside stronger policy integration. However, it is not clear whether a CDU-Green coalition would actually be more euro-friendly than a Grand Coalition. Under a CDU-Green coalition, there would be the danger that the SPD becomes slightly more sceptical towards rescue packages and forces the government to appear tough in the defence of German interests.
That being said, it is safe to assume that any possible coalition will become slightly more constructive towards the rest of Europe and will more coherently work for a prudent outcome in the two main problems to be addressed in the coming months: the Greek debt problem and the banking union. Nonetheless, change will remain limited as the euro crisis is not the most important issue for either the Greens or the Social Democrats. As we have repeatedly stated in the last few months, do not expect a fundamental shift in Germany’s economic policies.
What happened to the Eurosceptics?
The AfD has achieved an impressive result, gaining two million votes less than a year after the party’s conception. In light of the common perception amongst German voters that Germany is enjoying relative prosperity, the central AfD message that the “Euro divides Europe” did not hit home. For the AfD, not being present in parliament will make it difficult to maintain their momentum, though they will surely already have eyes on the upcoming European elections. Were the German economy to deteriorate, as some economists are predicting, the AfD may indeed witness growing support amongst disillusioned voters.
For the moment, the fact that they just missed out on the needed five percent means that the major parties can breathe a sigh of relief that they will not have to deal with an intentionally obstructive party when legislating on European issues.
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