What Does The Resounding Merkel Victory Mean For Europe?

By
3 mins. to read

By Filipe R. Costa

Last Sunday, voters in Europe’s most powerful economy went to the polls. The “most powerful woman in the world” and leader of the conservative CDU party, Angela Merkela, won. This was widely expected. Alongside her CSU allies, she gained 41.5% of the vote, falling just short of the number need for an overall majority.

Compared to the results in 2009’s election, the CDU/CSU coalition improved substantially. That year they only managed 33.8% of the votes.

As an interesting aside, the centre-left party, the SPD, also increased their share of the vote, improving from 23% in 2009 to 25.7% this year. The main losses occurred on the fringes of the political system as the Greens, the Left and the Liberal FDP party were all punished by the electorate. At the other end of the spectrum, the nascent anti-euro part, the AfD, managed to win 4.7% of the vote. This is another sign of growing anti-European sentiment within Germany and across certain countries, Britain included.

Despite the excellent result, Merkel has a thorn in her side, which will almost certainly prevent her from adopting the same course as she did in her previous government. In 2009 the CDU/CSU alliance won 239 of the 622 seats in parliament. Although this wasn’t enough to lead the country, Merkel was able to form a coalition with the FDP, who had 93 seats, and rule through this.

However, this time, although Merkel extended her support considerably, her preferred coalition partner, the FDP, got hammered at the polls. They only managed to gain 4.8% of the vote and did not win a single seat in parliament. This leaves Merkel with no choice other than to form a new grand coalition, involving the two most popular parties.  

It seems highly likely that Merkel’s alliance will reach an agreement with the SPD, but this will probably come at a cost. Concessions given by the SPD to Mekel in the 2005-2009 parliament cost them dearly. Their share of the vote dropped from 34% in 2005 to 23% in 2009. They hadn’t been able to push for social reform in Germany, during their time in power, and paid the price for this failure. They are bound to have learned from this experience and, this time, should play their hand far stronger.

Specifically, the SPD will most likely force Merkel to commit to introducing a minimum wage, overhauling the pension system and establishing a fund to save troubled banks, but financed by financial institutions instead of the taxpayer. The social agenda will be pushed to the fore and Merkel’s stance will most likely have to change. I expect her words to become softer and softer. Expect to hear much more about her new found passion for football!!!

During the last parliament, the SPD criticised Merkel for pushing too hard for structural reforms and spending cuts, neglecting negative growth and unemployment problems in the eurozone. Now that Merkel needs the SPD, they will push even harder and Merkel will probably have to lessen her commitment to austerity. Even though we don’t expect a real change in direction, we believe we will enter a new phase, under which more focus on social problems will rise to more prominence in the European debate.  

This is good news for Greece, Spain, Portugal and even France.

Regarding the UK and its lingering threat to leave the European project, in the event concessions aren’t given to the country, it could well be that Britain’s bluff is called and they find themselves out in the cold. Frank-Walter Steinmeier of the SPD (current leader of the opposition in the Bundestag) will most likely get a senior role in the current government, probably as Foreign Minister. As a Francophile and bearing in mind his comments that the UK will most likely decide to leave anyway, he may undermine Britain’s plans. The risk for the country is huge.

Comments (0)

Comments are closed.

YOUR FREE INVESTMENT MAG

Get real investment insights from some of the best minds in the business - with our free Master Investor Magazine.