The Big Winner in the German Election Wasn’t Angela Merkel

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On Sunday, the German federal election reached its unsurprising conclusion after an unsurprising campaign.

Angela Merkel’s center-right Christian Democrats (CDU/CSU) won the most votes (albeit far down from their results in the previous election) and is the only party capable of leading the next government.

Merkel’s party won 32.9% of the popular vote (down from 41.5% in the 2013 election), which will translate into an estimated 246 seats (down from 311) in the Bundestag, the German parliament.

That result would be catastrophic under most circumstances, but given the even more disastrous performance of the Social Democrats (SPD), the principal center-left party, Merkel will still be at the helm, but in a much weaker position.

After four years governing together in a grand coalition, voters chose to punish both major parties. However, the SPD got the worst of it. They dropped from 25.7% of the vote in 2013 to 20.5%, on Sunday.

Major Party Woes

Under the German proportional representation system, any party that wins more than 5% of the popular vote gets representation in the Bundestag. With the two main parties at historic lows, the parliament is more fragmented than it has been since the end of the Second World War.

Merkel is weakened on the right by the surprising surge of far-right Alternative for Germany (AfD), which won 12.6% of the popular vote, allowing it to enter the Bundestag as the third largest party.

Now comes the task of building a coalition in a fragmented Bundestag.

Merkel, politically damaged, going into what virtually everyone expects to be her final term as chancellor, has a challenging task ahead of her.

Coalition Mathematics

As one might expect, fragmentation can lead to problems governing. With Germany at the heart of the European economy, having a listless or weak government could lead to uncertainty and instability reverberating through the continent.

No matter what the outcome of coalition talks, Merkel will not have the dominant hand she has enjoyed heretofore, both within her country and within the government.

It could be months before the next government is officially formed, as Merkel works to forge a coalition with one or more other parties.

With the estimated 246 seats, she is 70 seats short.

With the AfD deemed pariahs by all the other parties in the Bundestag and the SPD declaring its intention to enter opposition to lick its wound and rebuild, Merkel’s options are slim.

The Left, a left-wing party (if the name didn’t give that away), will never go into government with the CDU. That leaves the Free Democrats (FDP) and the Greens, which won 11.3% and 9.4% of the vote respectively.

Depending on the final seat allocation, the FDP could end up with 80 seats. That would be enough to give Merkel a fairly slim, but workable, majority. If those seat numbers hold, that will be Merkel’s first move.

The Return of the Liberals

2017 was a year of redemption for the FDP. The party had been in coalition with Merkel’s CDU/CSU from 2009 to 2013.

They had entered government after their best ever electoral performance. But during their stint in government, the party leaders were seen as Merkel’s lackeys who traded their ideology for the prestige of cabinet offices.

In the 2013 election, the FDP vote collapsed below 5%, driving them out of not just the governing coalition, but the Bundestag.

The rising fortunes of the FDP should be welcomed by any supporters of free markets and other classical liberal policies. It has always been the most pro-market of any German party, and has a deep libertarian streak.

With their return to the Bundestag, and possibly to government, Germany will once again have a strong voice in favor of market-friendly policy. The party has learned from its past mistakes and will not be so easily pushed around this time.

The Dream Coalition

If the projected seat numbers are accurate, a CDU/CSU-FDP coalition is a distinct possibility.

That would represent the very best outcome a libertarian could hope for.

Merkel’s grand coalition with the SDP saw her policies drift leftward over the last four years. But the FDP back in government could arrest that movement and help steer Merkel’s party back in the right direction.

The FDP will have a lot of bargaining power in the forthcoming coalition talks.

With tough leaders hungry to see the party agenda enacted, this could be a turning point for Germany and the EU.

If the FDP uses its bargaining power wisely, we could see economic freedom bloom in Germany once again.

 

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John Engle

John Engle is a merchant banker and author living in the Chicago area. His company, Almington Capital, invests in both early-stage venture capital and in public equities. His writing has been featured in a number of academic journals, as well as the blogs of the Heartland Institute, Grassroot Institute, and Tenth Amendment Center. A graduate of Trinity College Dublin, Ireland and the University of Oxford, John’s first book, Trinity Student Pranks: A History of Mischief and Mayhem, was published in September 2013.

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