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Friedrich Merz Wins German Election With Far-Right In Second
Arne Delfs, Michael Nienaber and Kamil Kowalcze
5 min read
(Bloomberg) -- Germany’s conservative opposition leader Friedrich Merz won Sunday’s federal election, comfortably finishing ahead of the far-right AfD party and Chancellor Olaf Scholz’s Social Democrats.
Merz’s CDU/CSU bloc won 28.8% of the votes, followed by 20.2% for the Alternative for Germany, according to estimates from public broadcaster ARD. The Social Democrats finished third with 16.2%, the party’s worst result since World War II.
The vote holds particular weight as Europe’s biggest economy contends with stagnating growth, Russia’s war in Ukraine and US President Donald Trump threatening a global trade war that could hobble Germany’s struggling industrial sector.
“We have won this election,” Merz told a jubilant crowd at CDU headquarters in Berlin, saying that a coalition government must be assembled as quickly as possible. “The world out there won’t wait for us — and won’t wait for lengthy coalition discussions.”
The euro opened slightly stronger in Asia morning trading, up 0.3% to $1.0487. With exit polls broadly in line with what was expected by markets, investors’ attention will now turn to how quickly Merz can form a government.
As the final vote count is under way, Europe is contending with a series of existential challenges that need to be addressed immediately. European Union leaders will hold an emergency meeting next week to discuss its defense situation as it weighs the prospect of the US removing its vast military and financial support for Ukraine.
Washington has also started negotiations for peace — a prospect that would affect the security architecture on the continent for years to come — without the involvement of Europe or Kyiv.
The SPD conceded defeat, with Scholz calling the result “bitter.” Speaking to his supporters, Scholz said “it’s a bad result and that’s also my responsibility.”
Merz’s center-right CDU/CSU alliance will need at least one coalition partner to secure a majority in the lower house of parliament, or the Bundestag. The greater the number of parties, the more complicated coalition building becomes.
Merz’s most likely alliance options are either the SPD — almost certainly without any cabinet role for Scholz — or the Greens. Depending on the final makeup of parliament, Merz may need both in an unwieldy three-party coalition.
If only five parties qualify to enter parliament and the current projections stand, the CDU-led bloc and the SPD would have enough support to have a majority in the lower house.
SPD co-leader Lars Klingbeil flexed the party’s leverage with Merz by implying that it may decide against an alliance – and that the difficult work of coalition building fell on the CDU leader’s shoulders.
“I emphasize here that responsibility can be taken in a government, but also in opposition,” Klingbeil said. “The task of governing now lies with Friedrich Merz.”
The far-right AfD, which posted its highest ever share of the vote, looks set to become the main opposition force in parliament.
The AfD is calling for Germany to leave the EU and its single currency and wants to expel hundreds of thousands of people in a crackdown on undocumented migrants. Three of its state chapters in the former communist east are classified as extremist and are under surveillance by Germany’s domestic intelligence service.
Scholz ended his unpopular and unruly three-party coalition with the Greens and Free Democrats in November after months of squabbling over government debt.
He fired FDP Finance Minister Christian Lindner, a budget hawk who insisted on sticking to Germany’s constitutional borrowing limit, triggering an election seven months ahead of schedule. Scholz will continue to rule with the Greens in a caretaker capacity until a new government is in place, which could take weeks if not months.
Germany urgently needs deep reforms to restore competitiveness of key industrial sectors. The prospects of a new government that’s more supportive to business and interest-rate cuts lifted investor confidence by the most in two years.
However, Germany remains particularly exposed to China’s economic woes and its trade surplus with the US has drawn Trump’s ire. Transatlantic ties have been rattled by the new US administration’s move to enter direct talks with Russia over a peace deal for Ukraine without involving NATO allies.
“I know what great responsibility and the dimension of the work we now face,” Merz said.
Germany’s stock market is trading near all-time highs, driven by growing profits German companies generate abroad. The benchmark DAX index has also been buoyed by hopes that Merz will team up with the SPD party to pursue a more market-friendly agenda.
Some investors hope that Germany might lift or reform its net borrowing limit, the so-called debt brake, under a new government. Merz has signaled he may be willing to discuss a reform but also noted that deep cutbacks in Germany’s generous social welfare expenses would have to be implemented first.
The debt brake is baked into Germany’s constitution, which means a two-thirds majority in parliament is needed for a change. That’s a high hurdle since it would probably need support from opposition parties.
Cheers broke out at the AfD’s election night headquarters as the public broadcaster said the far-right party is on track to become the main opposition party in the next parliament.
The breakthrough for the AfD — which had previously peaked at 13% in 2017 — marks another landmark in the rising tide of support for far-right parties across Europe. The group’s jubilant candidate, Alice Weidel, pledged to overtake Merz’s CDU/CSU as she targeted victory in the next election in an interview with the state broadcaster.
“We will hunt them,” she said.
--With assistance from Karin Matussek, Christina Kyriasoglou, Angela Cullen, Alexey Anishchuk, Jana Randow, Aline Oyamada, Alexander Weber, Zoe Schneeweiss, Marilen Martin, Chad Thomas, Katerina Petroff, Christoph Rauwald, Chris Reiter, Carolynn Look, Iain Rogers, Alan Crawford, Petra Sorge and Naomi Kresge.
(Updates with euro trading in the fifth paragraph.)
