With the election results now mainly in the hard work begins for Chancellor Merkel to form a stable government.
From what I have gleaned so far here are the main bullets:
- Merkel’s CDU party win 41.5% of the vote giving them the largest share since 1990 but 5 seats short of an overall majority
- Peer Steinbruck’s SPD win 26% but he says they will not take part in a grand coalition
- The FDP fail to win a seat in the Bundestag and therefore have no representation in govt for the first time in post-war history
- The Greens polled 8.4% of the vote but were behind the Left Party who polled 8.6%. Both will have seats in the Bundestag
- The ant-euro AfD party showed well but finished with 4.7%
- The SPD has ruled out its own 3-way coalition with the Greens and Left parties
The last CDU/SPD alliance was in 2005-2009 and Merkel has made it clear she would work with them again but the SPD are holding out at present. After the results became clearer she said that it was
too early to say exactly what we’ll do. Maybe we won’t find anyone who wants to do anything with us
The SPD were expected to fare better than they did, even though they improved their share of the vote, and will now have their own internal differences of opinion to overcome in the negotiations with the CDU.
So on the one hand the endorsement of Merkel to serve a third term seems clear enough but the final outcome is far from being so, and it might take weeks for the discussions to bear fruit.
For the euro this means another period of political manouvering in the Eurozone, and markets rarely buy into uncertainty. The fact that Merkel’s preferred FDP junior partner is no longer an option explains the lack of any euro rally thus far.
As European traders arrive at their desks we may get a clearer picture of how markets want to react but it will be some time yet before we know for sure.
