German Federal elections will be held this Sunday. The race has been a tight one; not only in the last few weeks, but also over the last few months. While we believe that Angela Merkel will remain the Chancellor, with an estimated 30% still undecided, it’s unclear who her coalition partners will be.
In polling week-over-week, Merkel’s CDU/CSU party has held 40% while her current coalition partners, The Free Democrats (FDP), slipped half a point to 5.5%. The opposition, led by Peer Steinbrueck’s Social Democrats (SPD), gained 1% on the week to 27%, while its potential coalition partners the Greens lost -2% to 9% and the Left gained half a point to 8.5%. Other Parties, which include the anti-Euro Alternative for Germany (AfD), gained 1 point to 10%.
The polls equate to a lead of 1% for Merkel’s party with its current FDP coalition partners over the opposition SPD in coalition with the Greens and the Left. Note that despite slight shifts in the polls, Merkel’s 1% advantage this week is the same as she had a week ago. (See charts below)
As it relates to Monday’s financial markets, we expect that any coalition government that is formed with Chancellor Merkel’s party will represent a smooth transition to the market.
