‘Austerity belt’ proves fashionable in Germany, Merkel wins elections
Merkel’s cautious handling of the euro crisis secured her a third term as Chancellor, but she may
struggle to form a strong coalition to continue her pro-Europe agenda in continuing outreach to
the more peripheral ‘south’.
The coalition pairing will slow Merkel’s plan, and therefore a
major shift in European policy isn’t expected.
“This is a super result,” Merkel said, after clinching
41.5 percent of the vote for her conservative Christian
Democratic bloc (CDU-CSU), beating out her more euro-sceptic
rivals in her party’s biggest victory in 23 years.
"The result of Germany's election is, first and foremost, a
big vote of confidence in Merkel and her handling of the eurozone
crisis. No other leader of a major economy has been able to reap
more political dividends from an international financial and
economic crisis," Nicholas Spiro, of sovereign credit risk
strategist Spiro Strategy, told the Telegraph.
Angela Merkel’s euro-sceptic challengers ran their campaigns on
the premise the euro has failed, and the direction forward was to
step away from Europe.
The Social Democrats (SPD), came in a far second with 25.7 percent of the vote. Leader Peer Steinbrueck, her former finance minister and staunch opponent of her handling of the euro crisis, says he won’t serve under the chancellor, and was quoted as saying, “the ball is in Mrs. Merkel’s court.”
If Merkel teams up with the SPD, she may have to concede on some
domestic issues, like a higher minimum wage or stricter financial
Merkel’s campaign charm was better than expected second quarter
growth, which in Germany rose to 0.7 percent. Yearly growth is
forecast to be between 0.3 and 0.4 percent, according to the
European Commission. The 17-member eurozone is expected to
contract 0.4 percent.
The CDU's junior coalition allies - the pro-business Free
Democrats (FDP) - received only 4.8 percent, which is below the
five percent threshold required to gain a seat in parliament.
Alternative for Germany, which campaigned on euro-sceptic fears
about the cost of eurozone bailouts, likely took away votes from
Merkel’s coalition parties, and received 4.7 of the vote.
Germany's Left party, which aims for democratic socialism, came
in third with 8.6 percent, while the Greens, a likely pro-Europe
ally, got 8.4 percent.
The Pirate Party, advocating for internet freedom and copyright
law reform, ended up with 2.2 percent and the far-right
nationalist NDP party received 1.3 percent. All other parties
received a collective 2.7 percent of the votes.
Merkel may very well go down in history as the crisis chancellor, as much of her time in office has been overshadowed by the deep financial crisis, which began in Greece and has spread over the European continent.
Greece, Portugal, Cyprus, and other bailout countries can rest
assured Germany will continue backing the Euro under Merkel, who
remains an advocate of her austerity campaign. Germany’s recovery
success is proof the euro can drive growth and create jobs,
Export-driven Germany has emerged from the crisis and boasts low
unemployment and relatively high growth figures, but an aging
population and piling pension costs will be an obstacle for
Merkel at home.
The next tricky question for Merkel will be Germany’s stance on
Europe’s banking union, a supervisory authority that will
directly oversee some 130 banks representing about 80 percent of
all bank assets in the eurozone. Germany and France have both
resisted handing over economic sovereignty to Brussels