Germany’s federal election last week resulted in a clear majority for the centre-right. Chancellor Angela Merkel of the CDU can now ditch the Social Democrats (SPD), with whom she governed for four years, and lead a coalition with the free market FDP, who achieved their best result with 14% of the vote. The German DAX index greeted the news with a near-3% jump on Monday.
What the commentators said
The FDP has sensible proposals to tackle a range of key issues facing Germany. These include lacklustre consumption, the damaged banking system, and the funding of healthcare and pension systems, says Pierre Briancon on Breakingviews. But anyone now expecting Merkel to implement the “radical reform agenda” she ran on in 2005 (and had to ditch when the CDU and FDP together failed to get over 50% of the vote) may be disappointed, said Lex in the FT.
Although free to do so, now that the Social Democrats have gone, she appears to have shifted towards the centre over the past four years. So the extent to which Germany will change depends on how far the FDP can push her during the coalition negotiations.
Early signs aren’t encouraging, said Heike Goebel on FAZ.net. Indeed, Merkel’s first few pronouncements suggest she thinks she’s still governing with the SPD – she says sectoral minimum wages will stay, and is rejecting FDP calls to dismantle the centralised health insurance fund. Merkel promises income-tax cuts and corporation tax reform, but there’ll be no dismantling of the last four years’ policies.
Economic policy “won’t change radically”, agreed Commerzbank’s Joerg Kraemer. This is no “Thatcherite revolution”. The election result is “good for Germany’s economy and business”, said Lex. But just how good “remains to be seen”.