Merkel’s party wins German election, coalition partner out of Parliament

Angela Merkel’s conservatives won a resounding election victory in Sunday’s federal election, obtaining their best result since 1990, the year of German unification.

 This outstanding performance of the Conservative’s bloc is a personal victory for the outgoing Chancellor, who has been able to cement her position as one of Europe’s most influential and longest-serving leaders. Having garnered more than 41.5 % of votes, Merkel’s Christian Democratic Union and its Bavarian sister party, the Christian Social Union, have increased their share of the vote by almost eight percent  (+7.7 %) compared to the 2009 election, when they received only 33.8%. This outstanding showing paves the way for a Merkel’s third term. Germans voters have indeed handed Merkel her third term in a wave of appreciation for her role in handling the economy during  the Eurozone crisis.  With unemployment well below the Eurozone average, Germans feel that their Chancellor of eight years has proved to be able to stand up for their interests at a time of great economic slowdown across Europe and difficult challenges.

Merkel’s junior coalition partners in the outgoing government, the pro-business Free Democrats (FDP),  suffered a humiliating defeat, scoring only 4.8 %, below the five percent needed for parliamentary representation. Having lost almost ten percentege points (-9.8 %) since the last election in 2009, when they entered the government on a record result of 14.6 %, the Free Democrats will no longer be represented in Parliament. Their disappointing showing  marks the first time in history that their party fails to win representation and does not make into the Bundestag.  Centre-left challenger Peer Steinbrueck’s Social Democrats finished second well behind Merkel’s conservative bloc with 25.7%, up slightly from 23 % in 2009. Their Greens allies ended up with only 8.4%, down from 10.7 % in 2009, while the Left Party – with whom both the SPD and the Greens said they won’t enter in a coalition – secured a 8.6 % (-3.3 % compared to 2009). The anti-euro Alternative for Germany (AfD) party, which advocates for an “orderly dismantling of the Eurozone,” almost reached the five percent threshold, by gaining 4.7 %. The Pirate party, calling for internet freedom, scored only 2.2 % and the far-right nationalist NDP party ended up with 1.3% . All other parties gained a collective 2.7 %. Analysis: Despite having improved their results remarkably compared to the 2009 election, the conservatives came only close to gaining the absolute majority in the Bundestag, a result achieved only in 1957 by Adenauer. Given that Merkel’s conservatives cannot govern alone, the likeliest outcome is for Merkel a coalition with the Social Democrats. Yet, after all, having fallen just short of a majority is an outcome that turns out to be not that detrimental for her. Merkel, who has always proved to be more a methodical mediator than a charismatic leader may benefit from the lack of an absolute majority. Reaching the absolute majority in fact  would have meant for her facing the prospect of governing with a wafer-thin majority of seats. In 2005, despite an electoral campaign based on tax cuts and deregulation Merkel was forced to form a “grand coalition” with the Social Democrats. Yet, that coalition government resulted in a more successful experiment than originally expected. On the contrary, despite the outgoing centre-right coalition she leads at the moment, with the pro-business Free Democrats, should have been the best and more cohesive coalition she could form, it has turned out to be dogged by constant tension and fierce disputes. Despite the good record of the past grand coalition, few within the Social Democratic Party have much enthusiasm for forging again a Merkel-led coalition. A right-left coalition would not be on the same level playing field, given the gap of votes between the two main rival  parties. Many in the SPD are concerned of the possibility of being marginalised in a coalition under Merkel’s lead.  After all, the Social Democrats are aware that after having teamed up with Merkel’s party in a grand coalition government from 2005 to 2009, they were later punished by the electors since it was mainly the Chancellor that  got the credit for anything positive that the government achieved. Therefore, before joining any grand coalition, the SPD would try to demand a high price for any concession. What’s next: Needless to say that long coalition talks are laying ahead. The outcome, however, would be a coalition with such an overwhelming majority that Merkel wouldn’t have to be concerned about possible rebellions coming from within her own ranks when future Euro decisions or domestic measures are voted in the Bundestag. A huge majority in Parliament will strengthen her lead. Additionally, teaming up with her main rivals will spare her the difficulty of dealing with a hostile Bundesrat, which has the power to block her policies. Germany’s Upper House of Parliament, where the German states are represented is indeed dominated by the SPD and the Greens. With regard to the Eurozone crisis: With the SPD in grand coalition, there could be a somewhat easing of austerity, and at some point even an acceleration on the banking union if some legal hurdles are solved, even though  Chancellor Merkel will always be constrained by the Constitutional Court, which will rule next month on ECB’s bond-buying program. However, even if Merkel may even be able to secure the two-third majority needed to change the German Constitution and enjoy a greater political capital, expectations of a total reverse of the German’s stance with regard to the Eurozone crisis should be played down. Germany won’t change overnight the bipartisan belief in fiscal prudence. Conclusion: Over the past few years, Germans have benefited from a declining unemployment and a strong economic recovery. Nonetheless, the Chancellor faces major challenges in the next term. With the negative record in terms of reforms implemented over the last legislature, fairly rigid labor institutions, low service sector productivity, and large demographic challenges, the next government will have to implement new reforms and possibly set out a more ambitious vision for the future of the Eurozone.