Analysis: German election

While the outcome of the German election was no surprise, the extent to which individual parties rose and fell was.

The pro-business Free Democrats (FDP), led by Guido Westerwelle, achieved a 14.6% vote—its best result ever. And for the first time since 1998, the party will be part of a ruling coalition. The FDP will form a new government with re-elected chancellor Angela Merkel’s centre right Christian Democratic Union (CDU)/Social Union (CSU) bloc.

Merkel’s previous coalition partners, the Social Democratic Party (SPD), suffered its worst election result since 1949. Having spent 11 years governing the country, it has to surrender its co-governship and go into opposition. The Green Party and the Left Party both achieved record highs.

According to the provisional result, CDU/CSU achieved 33.8% (in 2005: 35.2%), the SPD 23% (34.2%) and the FDP 14.6% (9.8%). The Green Party won 10.7% (8.1%) and the Left 11.9% (8.7%).

The number of Germans that voted fell again from the previous record low in 2005, when 77.7% voted. This time, it was about 71%.

Jennifer McKeown, a European economist at Capital Economics, says the overall results were broadly in line with what was expected. “A new coalition was more likely than another grand coalition,” she says.

“Commonalities between the SPD and CDU/CSU were used up quite quickly,” says Gernot Nerb, a senior economist at the ifo Institute for Economic Research in Munich.

Even with the new government, McKeown does not expect a great difference in the politics. Although, she says, the new coalition looks like it is set to tighten stimulus more rapidly. “They’re already talking about lower tax rates, which would be good for Germany’s economy,” she says. However, there is little sign to cut back on social benefits.

Policy decisions all depend on how well the German economy is recovering from the recession, McKeown says. Germany officially escaped recession when it reported a growth rate of 0.3% for the second quarter of 2009.

The recession and Germany’s rising unemployment rate were at the centre of election campaigns this year. However, they were somewhat lost in importance as the government subsidised Kurzarbeit [short time work] to avoid redundancies.

Nerb says unemployment, a lagging indicator, is still set to rise. Kurzarbeit is still in place, but many of those contracts will expire in spring, and companies will eventually have to cut their workforces.

How well the new government will do, says Nerb, depends on how strong and sustainable the German economy will be.

“The new government is in a good position because the German economy is already recovering,” he says. “We are through the worst.”

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