Election Primer: Merkel Chancellor, Grand Coalition Likely

BMI View: Angela Merkel will retain the chancellorship, but the composition of the current government looks likely to change from a centre-right coalition to a grand coalition between the centre-right and centre-left. This implies a slight shift in fiscal, immigration and eurozone policy, and more disagreement on energy policy, but any changes in overall trajectory will be modest.

With a few days to go before the September 22 German federal elections, the outcome is too close to call. We still believe Angela Merkel will remain chancellor, and that a grand coalition between the centre-right Christian Democrats (CDU-CSU) and centre-left Social Democrats (SPD) is the most likely scenario, although we are much more confident on Merkel staying in office than the nature of the coalition. We also do not rule out a surprise strong showing by the newly founded Alternative for Germany (AfD) party, which is running on a euro-sceptic platform and has surged in the polls over recent months.

Neither the CDU-CSU nor SPD would likely to join a coalition with the AfD if the latter did manage to cross the electoral threshold, but the party could steal potential votes from the centre-right Free Democrats (FDP), the junior member of the current governing coalition. This in turn would make a grand coalition more likely, as the FDP's popularity is currently teetering around the 5% threshold required for Bundestag representation. Another potential surprise could come from a high turnout, since around half of all voters are still undecided, meaning there could see a substantial divergence between official polling and the final result.

Race Not Yet Decided
Germany - How Germans Would Vote Today, %

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This article is tagged to:
Sector: Country Risk
Geography: Germany, Germany, Germany

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