German Elections – aka The Road To Coalition

German Elections – aka The Road To Coalition

September 24th sees the German Elections with Angela Merkel highly fancied to win a 4th term in power. All the latest polls point to the block supporting Merkel, the Christian Democratic Union (CDU) and the Christian Social Union (CSU) emerging as the largest party in the Bundestag, while still falling short of the majority needed to form a government.

 

This isn’t a rare occurrence in German elections where coalition governments are a usual landmark on the political scenery. The final make-up of the parliament after the elections will be largely determined by the showing of the smaller parties and the potential for forming coalitions.

 

Things are even more fragmented this time around with six main parties vying for parliamentary seats.

 

Main Parties Contesting German Elections

Christian Democrats (CDU)
The biggest party in Germany. Headed by Angela Merkel, this center-right block is made up of the Christian Democratic Party (CDU) and the Christian Social Union (CSU) and campaigns on a platform of reducing unemployment, broad tax cuts and increased public sector infrastructure spending.

 

Social Democrats (SPD)
The largest left leaning party in Germany, the SPD campaigns as a Centre-Left working class party. Led by Martin Schulz. President of the European Parliament from 2012 to 2017, he announced his resignation from the post in late 2016 at the end of this current term and his intention to lead the SPD in the 2017 German Chancellorship elections. The SPD had been showing consistently high public opinion numbers since the election of Mr. Schulz to their helm although latest polls point to softening support.

 

Linke
The Left wing party lead by Sahra Wagenknecht is a usual target for protest votes and campaigns on tried and tested crowd pleasers such as German withdrawal from NATO and higher minimum wages.

 

Grüne
The Green party led by Katrin Göring-Eckardt and Cem Özdemir. Campaigning on a platform of environmental and social policies, the Greens are widely regarded as the keystone in this election as they could well have the deciding votes in the coalition formation saga.

 

Free Democratic Party (FDP)
Led by Christian Lindner, Merkel’s junior coalition partner between 2009 and 2013 failed to win any directly seats in the Bundestag in the 2013 elections and came in below the 5 percent threshold required for proportional representation, leaving it without in the German parliament for the first time in its history. The FDP campaigns on a manifesto of human rights, civil liberties, and internationalism and is currently nine state parliaments inside Germany and in the European Parliament.

 

Alternative For Germany (AFD)
Germany’s version of the Golden Dawn party in Greece, the AFD is led by Alice Weidel and Alexander Gauland. A hardline right-wing party the AFD manifesto is vocally anti-EU and anti-immigration. Populist policies have siphoned votes from all the other parties and have wide appeal, particularly among lower income households.

 

German Electoral System
Voters in Germany have two votes in parliamentary elections. The first is a direct vote for a particular candidate in a particular constituency. This first vote accounts for 299 seats from the 598 seat total on a first-past-the-post basis.

 

The second is a party vote, with seats awarded in the Bundestag based on each party’s share of the vote for each constituency. This party vote accounts for the remaining 299 seats in the German parliament.

 

The latest poll consensus shows the CDU well ahead of their nearest rival, the SPD but well short of the absolute majority needed to form a government. If the electorate votes with the same numbers as these latest polls then seat composition would break down as follows:

 

 

It seems unlikely the AfD will be anyone’s valentine so potential coalitions will have to come from the other combinations. CDU + SPD, SPD + Linke + Grüne, CDU + Grüne + FDP, CDU + FDP, CDU + Grüne. The possibilities are wide and varied. Can the AfD feature at all? Highly unlikely, particularly in a country like Germany with its fairly recent history.

 

Results from these elections could have a far deeper effect than simply the makeup of the Bundestag. Brexit weighs heavily on everyone’s mind, and it’s looking increasingly like Germany won’t benefit from any hard Brexit deal.

 

One thing the markets prize above pretty much everything else is continuity, and Angela Merkel represents just that. If she emerges as the head of a new Government, even if that comes in the form of a coalition, then continuity is preserved. Anything other than a coalition involving Angela Markel and the CDU could well prove to be a bridge too far for the markets to factor in, particularly given the hard Brexit scenarios for the German economy.

 

Disclaimer:
This article is for educational and informative purposes only and should not be considered as investment or trading advice

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