German election – Chastened Merkel braces for coalition tussle after vote

German Chancellor Angela Merkel gestures during a cabinet meeting at the Chancellery in Berlin, Germany, March 23, 2016. REUTERS/Fabrizio Bensch

 Reuters – Germany’s Angela Merkel turns to the task of sounding out partners to build a coalition government after securing a fourth term as chancellor in Sunday’s election although she was weakened by a surge in support for the far right.

Damaged by her handling of the 2015 migrant crisis, Merkel’s conservative bloc took 33 percent of the vote, down 8.5 points from the 2013 election and hitting its lowest level since 1949.

The German establishment was shocked as conservative voters flocked to the anti-immigration Alternative for Germany (AfD), which took 12.6 percent of the vote. It was the first time a far-right party has entered the German parliament in more than half a century.

However, Merkel’s party is still the biggest parliamentary bloc and Europe’s most powerful leader said her conservatives would set about building the next government, adding she was sure a coalition would be agreed by Christmas.

“There cannot be a coalition government built against us,” she said.

However, a weaker Merkel at the head of a potentially unstable coalition with the pro-business Free Democrats (FDP) and Greens, untested at national level, unsettled investors.

The euro  slipped in early Asian trading on Monday trading down 0.2 percent at $1.1930, with the prospect looming of months of uncertainty in Europe’s biggest economy.

Some business leaders were alarmed, saying a party likened by the foreign minister to Nazis could hurt Germany.

“The AfD in the German Bundestag is damaging our country,” employers’ association BDA leader Ingo Kramer said. “The other parties now have the task of cornering the AfD in direct parliamentary debate.”

One of the AfD’s leading candidates, Alexander Gauland, gave a foretaste of what was to come, vowing to “hound” Merkel and “get our country and our people back”.

AfD’s launch in early 2013 was all about challenging the eurozone bailouts and rejecting the EU’s arguments for keeping the euro.

It has since veered right with policies on migrants and Islam, but still promises to abandon the euro and reintroduce the Deutschmark.

They said German taxpayers should not be made liable for massive debts incurred by profligate eurozone governments (such as Greece)


If the EU fails to reform and continues centralising, AfD says, the party will seek to pull Germany out of the EU.

Industry leaders urged Merkel to move fast.

“Our companies need clear signals. Now it’s all about averting damage to Germany as a place of business,” Dieter Kempf, president of the BDI industry association, said.

After her current Social Democrat (SPD) coalition partner said it would go into opposition after slumping to a post-war low of 20.5 percent, Merkel’s main option is to pursue a three-way partnership.

A “Jamaica” alliance of her conservative bloc, the FDP, on 10.7 percent, and the Greens, on 8.9 percent, could be fragile due to fundamental differences between the Greens and the Free Democrats have traditionally been bitter rivals in Germany on issues from migrants to tax, the environment and Europe.

In particular, the prospect of Merkel sharing power with the FDP is likely to create problems for deeper integration of the euro zone as proposed by French President Emmanuel Macron.

Regarding the Greek debt, it is likely that a new  Merkel-led government will grow much more demanding with the Free Democrats as their partners.

The Free Democrats will insist on pressing other countries with the Euro currency to reform and take a harder line on debt. If FDP is offered the  Finance ministry as a trade off for their support, their likely candidate for finance minister is Alexander von Lambsdorff  who has lately threatened Greece again with exit and suggested that the Greeks better leave before tearing down others.