Important legal information

The content displayed on this website is exclusively directed at qualified investors, as defined in the swiss collective investment schemes act of 23 june 2006 ("cisa") and its implementing ordinance, or at “independent asset managers” which meet additional requirements as set out below. Qualified investors are in particular regulated financial intermediaries such as banks, securities dealers, fund management companies and asset managers of collective investment schemes and central banks, regulated insurance companies, public entities and retirement benefits institutions with professional treasury or companies with professional treasury.

The contents, however, are not intended for non-qualified investors. By clicking "I agree" below, you confirm and acknowledge that you act in your capacity as qualified investor pursuant to CISA or as an “independent asset manager” who meets the additional requirements set out hereafter. In the event that you are an "independent asset manager" who meets all the requirements set out in Art. 3 para. 2 let. c) CISA in conjunction with Art. 3 CISO, by clicking "I Agree" below you confirm that you will use the content of this website only for those of your clients which are qualified investors pursuant to CISA.

Representative in Switzerland of the foreign funds registered with the Swiss Financial Market Supervisory Authority ("FINMA") for distribution in or from Switzerland to non-qualified investors is Robeco Switzerland AG, Josefstrasse 218, 8005 Zürich, and the paying agent is UBS Switzerland AG, Bahnhofstrasse 45, 8001 Zürich. Please consult www.finma.ch for a list of FINMA registered funds.

Neither information nor any opinion expressed on the website constitutes a solicitation, an offer or a recommendation to buy, sell or dispose of any investment, to engage in any other transaction or to provide any investment advice or service. An investment in a Robeco/Robeco Switzerland product should only be made after reading the related legal documents such as management regulations, articles of association, prospectuses, key investor information documents and annual and semi-annual reports, which can be all be obtained free of charge at this website, at the registered seat of the representative in Switzerland, as well as at the Robeco/Robeco Switzerland offices in each country where Robeco has a presence. In respect of the funds distributed in Switzerland, the place of performance and jurisdiction is the registered office of the representative in Switzerland.

This website is not directed to any person in any jurisdiction where, by reason of that person's nationality, residence or otherwise, the publication or availability of this website is prohibited. Persons in respect of whom such prohibitions apply must not access this website.

I Disagree
Merkel set for fourth term as German Chancellor

Merkel set for fourth term as German Chancellor

21-09-2017 | Insight

Germans go to the polls on Sunday in what is likely to continue Angela Merkel’s reign as head of Europe’s largest economy.

  • Léon  Cornelissen
    Léon
    Cornelissen
    Chief Economist

Speed read

  • Center-right CDU/CSU set to keep coalition with center-left SPD
  • Strong showing by euroskeptic FDP could unsettle markets
  • Far-right may sit in parliament for first time since WW2

Her reinstatement as Chancellor for a fourth term would be broadly welcomed by markets as continuing Germany’s steady-as-she-goes path, especially if the current coalition carries on. Merkel’s center-right Christian Democratic Union/Christian Social Union (CDU/CSU) remains ahead in the polls with a double-digit lead over their main rival – and current governing coalition partner – the Social Democratic Party (SPD).

However, the rise of the anti-euro Alternative for Germany (AfD) means Germany is on course to see a far-right party in the national parliament for the first time since World War Two. Minority parties must get over 5% of the vote to win seats, and the anti-immigration AfD is already polling above 10% of the total predicted vote. The main parties have already ruled out a coalition with it.

Meanwhile, the ‘dark horse’ may prove to be the liberal but somewhat euroskeptic Free Democrats (FDP). The party currently has no seats in the 598-seat Bundestag but has over 10% support in the polls, which means it may hold the keys to power. Other parties contesting the election are the Greens, who currently have 63 seats, and the far-left group Die Linke, who have 64.

Two viable coalitions

“The polls have been pretty consistent in predicting a CDU/CSU victory, which means Merkel will get her fourth and probably final term,” says Robeco Chief Economist Léon Cornelissen. “It now seems that there are only two viable coalitions with an overall majority – one between the CDU/CSU and SPD as before, or the ‘Jamaica coalition’ of the CDU/CSU along with the FDP and the Greens should the SPD emerge as too weak.”

The coalition got its name because the colors of all three parties taken together resemble the Jamaican flag. “However, this isn’t all that likely because of the large differences between the policies of the FDP and the Greens,” Cornelissen says. Such a coalition has never been tried at a central level, but can’t be ruled out.”

“The real worry is the AfD, as it would be the first time since the war that we’ve had the far-right at a federal level in parliament in Germany. Merkel covers the center in German politics, but now she’s facing a strengthening far-right. The CSU has always said it would ‘never accept a party to the right of us’, but that looks like changing. There has never been a successful euroskeptic party in Germany, but there are limits to how far the far right can go.”

Potential coalitions. Source: Financial Times/wahlrecht.de

Focus on France

Cornelissen says all eyes will be on how many seats the FDP ends up getting, and its resulting effect on future relations with French President Emmanuel Macron. The party is opposed to Macron’s ambitions to replace the International Monetary Fund with a European equivalent, along with his plans for a Eurozone budget. The party also supports Greece leaving the EU and the closure of the European Stability Mechanism which has helped with bailouts.

“The FDP is a natural coalition party for the CDU as they have successfully worked together in the past, and they also believe in lower taxes,” Cornelissen says. “Such a deal would be considered very business friendly and a boon for the stock market. But the FDP has a broader agenda that is more euroskeptic, which would make a future deal with Macron difficult.”

“It’s a kind of barometer for the strength of populism in Germany. A particularly strong showing for the FDP would unsettle markets for a while, as it would also force Merkel to be not that generous with France. However, the real euroskeptic party is the AfD, as they want a referendum on leaving the EU and the reintroduction of the Deutsche Mark. They’re the real threat.”

SPD on the backfoot

Such euroskeptic worries means the status quo may prevail, though the SPD has been losing votes following a poor election campaign by its leader Martin Schulz, Cornelissen says. “Schulz has promised to go to party members to get an agreement to continue the current grand coalition, and this could be particularly difficult because its support has been collapsing in the polls.”

“We could therefore even end up with a CDU/CSU minority government, though they would still need the support of the SPD in the upper house, and would have to deal with them in some way anyway.”

So what about the likely future of the Germany economy, still the largest and strongest in Europe? “In economic terms you can expect extra money for infrastructure and a lowering of taxes for households, which would be good for growth,” says Cornelissen.

“The German economy may experience some difficulties next year because of the strength of the euro hurting exports, and Germany is vulnerable to economic weakness in China, where the risks are on the rise because of China’s unsustainable rise in debt. All in all, we believe that growth in Germany will be in line with this year’s expectation.”

Stay informed on our latest insights with monthly mail updates
Stay informed on our latest insights with monthly mail updates
Subscribe