Angela Merkel’s CDU/CSU (Christian Democratic Union of Germany – the Christian Social Union in Bavaria) has emerged as the biggest bloc in the Bundestag with 246 seats. While victory is sweet for Mrs. Merkel, it came at a cost.
Over 8.5 percent down from the last election results and with little hope of resurrecting the grand coalition with the Martin Schulz led SPD (Social Democratic Party of Germany). Not quite a Pyrrhic victory as the road still leads to the Chancellorship, but it has come at a high cost to Mrs. Merkel’s base.
With the SPD ruling out any ideas of a coalition government with the CDU/CSU bloc, Mrs. Merkel’s path to power will be a complicated process.
This election marks the first time in over sixty years that a radical right-wing party wins seats in the German Bundestag. The anti-immigrant, Eurosceptic AfD emerged as the third biggest party with a 12.6 percent share of the vote and what is projected to be 94 parliamentary seats.
This strong showing is an extraordinary result for a party that failed to clear the 5 percent threshold for parliamentary representation in the last elections. This time around the AfD saw an enormous influx of support, mainly from the CDU/CSU bloc.
Radical right-wing parties entering parliaments around Europe isn’t something new. We’ve already seen Golden Dawn in the Greek parliament and the ELAM party in the Cypriot parliament.
This time though it happened in Germany. A country which should have had its fill of anything even remotely associated with the radical-right has just made the right-wing AfD the third largest party in the Bundestag.
It hasn’t been all Schaumwein and Kaviar for the AfD though. A highly fragmented and fractious party, defined mostly by opposition to other parties, the AfD is already counting the cost of success. Party leader Frauke Petry announced she would not be sitting with party colleagues in the Bundestag, choosing instead to serve as an independent MP.
Ms. Petry, a moderate, had been embroiled in a long-standing stand-off with the extreme right-wing faction in the party. In April of this year, Ms. Petry efforts to carve a more moderate path for the party were stymied by co-leader Jörg Meuthen.
In spite of the leadership issues, it’s been a startlingly successful campaign for the AfD. With a supporter base primarily drawn from the CDU, from nowhere to over 90 parliamentary seats, by any account, Germany today politically is a different animal from the Germany before the elections.
Forming a coalition government is going to be a steep road for Mrs. Merkel. The pool of acceptable coalition partners has narrowed considerably after the SPD announced they would not be willing partners so any coalition will by definition be multi-colored, minus of course, the AfD who isn’t on anybody’s wish-list.
The only combination open to Mrs. Merkel that gets past the 50% margin required is the CDU/CSU + Green + FDP, a three-party coalition.
Forming this new coalition government looks like being a long and drawn-out process for Mrs. Merkel with no certainty of the outcome and what is sure to be a lengthy list of concessions in both cabinet composition and policies.
This uncertainty has already translated into a correction for the recent Euro rally which dipped 0.5 percent against the USD in the early Asian session.
Germany has gone from stable and predictable to unstable and unpredictable in the blink of an election.
The European Union has a new adversary to contend with, one perhaps it had never really thought about that much. A new wave of right-wing sentiment inside its most important economic member and what until recently was the poster boy for the ideals of the European Union.
The fallout could be far-reaching. Austria goes to the polls in October of this year, and the Freedom Party of Austria (FPÖ) is the local variation of the AfD.
Euro-scepticism has been around for almost as long as the European Union and its various guises over the years, but until now it’s been a “wine and cheese” kind of protest. Mild and relatively low-key.
That party has morphed into Brexit and the AfD. A 94 strong parliamentary bloc in what should have been immune to any further right-wing extremism.
This article is for educational and informative purposes only and should not be considered as investment or trading advice.