Emerging Markets / September 25, 2017

Continuity and Novelties in German Politics

On Sunday, September 24, Germany held federal elections for its national parliament’s lower and most important chamber, the Bundestag. These elections are held every four years and count with the participation of numerous political parties competing for some 690 seats in 2017. Therefore, being a federal parliamentary republic, Germany’s main political leaders must often form coalitions in order to consolidate a governing majority. This year, as expected, the center-right Christian Democratic Union and Christian Social Union (CDU/CSU), also known as the Union parties, won a plurality of the votes under the leadership of Chancellor Angela Merkel. Serving as Chancellor since 2005, Angela Merkel is set to become one of Germany’s longest serving Chancellors of the modern era. However, Merkel’s Union parties underperformed during this election with approximately 33% of the votes, which represents an almost 8% decrease from their score in 2013 and does not facilitate a parliamentary majority.

Meanwhile, the biggest upset of the electoral evening came from the Social Democratic Party (SPD), which registered its lowest score since 1945 at little under 20% of the vote as compared to about 26% in 2013. Led by the former President of the European Parliament, Martin Schulz, the SPD was hoping to win a majority and break from its need to participate in a coalition with the CDU/CSU. Therefore, it should not be a surprise that, after antagonizing Merkel throughout the campaign, Martin Schulz decided that the SPD will not be forming the traditional governing coalition with Chancellor Merkel, but rather become leader of the opposition. This political move complicates the scenario for Angela Merkel as she will have to find other political allies to create a governing majority and none of her options seems to be an easy fit. In order to form a new governing coalition, Chancellor Merkel will have to navigate the complex task of finding a compromise with both the center-left Green Party and the liberal Free Democratic Party (FDP). A three-way coalition would be unprecedented in Germany’s modern history and could represent Chancellor Merkel’s most unstable government so far.

Continuity and Novelties in German Politics

Another important event of yesterday’s election was the impressive performance of Alternative for Germany (AFD), which is a far-right anti-immigrant and Eurosceptic party created in 2013. Unrepresented in Germany’s Federal Bundestag until now, the AFD came in third place with approximately 13.5% or 95 parliamentary seats. Interestingly, the cities and regions that voted the most for the AFD are those found along the eastern parts of the country, bordering Poland and the Czech Republic.

Overall, Germany has a total territory of little over 357.000 square kilometers, which is somewhat smaller than Montana. Likewise, the country has a total population of some 81 million citizens, 76% of which live in an urban setting, notably the capital city of Berlin with 3.6 million inhabitants. Finally, the national annual gross domestic product (GDP) of Germany is almost US$4 trillion (PPP) and the country has experienced positive economic growth upwards of 1.5 % in recent years.

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