Angela Merkel won an overwhelming endorsement from German voters, putting the country's first female chancellor on course for the biggest election tally since Helmut Kohl's post-reunification victory of 1990. Merkel's Christian Democratic bloc took 41.5 percent to 25.7 percent for the Social Democrats of Peer Steinbrueck in yesterday's election, according to results from all 299 districts. That leaves her short of a majority and needing a coalition partner to govern Europe's biggest economy. "This is a super result," Merkel, who is now set to become the fourth chancellor since the war to win a third term, told supporters at her party's headquarters in Berlin. "To the voters, I promise that we will handle it responsibly and with care. We will do everything we can in the next four years to ensure that they're once again successful years for Germany." After sweeping the election on the back of an unemployment rate near the lowest in two decades and her handling of the euro-area crisis, Merkel, 59, must now look for a governing ally after the Free Democrats, crashed out of the lower house of parliament. Party leaders are due to meet today to discuss coalition talks. The euro gained 0.1 percent to $1.3532 at 9:24 a.m. in Berlin. The benchmark DAX Index, which has gained 14 percent this year, slipped 0.3 percent. German Example During the campaign, Merkel said that insisting on reforms in euro countries that received aid was the only way to raise Europe's competitiveness, citing the fall in German joblessness from a post-World War II high of 12.1 percent in 2005 following a labor-market overhaul. The German unemployment rate is now 6.8 percent compared to 12.1 in the 17-nation euro region. German 10-year bond yields are 1.94 percent, while comparable U.K. gilts yield 2.92 percent and U.S. debt 2.73 percent. Merkel's victory gives her another four years at the helm. If she serves the whole term as she said she intends, she will have spent 12 years as German leader, more than the 11 1/2 years managed by British Prime Minister Margaret Thatcher. To get there, she must first find a governing partner. Merkel's choice is limited to a re-run of her first-term "grand coalition" with her traditional SPD rivals or the first-ever national alliance with the Greens. Neither party rushed to endorse a coalition. Steinbrueck, her former finance minister, reiterated that he won't serve under the chancellor, saying "the ball is in Mrs. Merkel's court." Difficult Partners "The SPD and Greens are making it perfectly clear this evening how difficult a coalition would be for either party," Carsten Nickel, a London-based analyst with Teneo Intelligence, said by telephone. While Germany's first chancellor from the formerly communist east again made history with her election score, a third term takes her into uncharted waters to face the perils of a third Greek bailout and a potential breakdown in her 550 billion-euro ($744 billion) energy overhaul. For now, with wages rising and the budget deficit virtually eliminated, voters backed her handling of the domestic economy, and her push for austerity in the euro zone in exchange for aid. They punished the Free Democrats led by Vice Chancellor Philipp Roesler after four years of bickering and failure to deliver on its tax-cutting pledges. ‘Personal Victory' "This is a great personal victory for Merkel," Jan Techau, director of the Brussels office of the Carnegie Endowment, said in a telephone interview. "But it comes at a very bitter price of having lost her FDP coalition partner." The FDP took 4.8 percent, below the 5 percent hurdle needed to win seats in the Bundestag for the first time since the first elections of the postwar period in 1949. The Greens, with which the SPD governed from 1998 to 2005, took 8.4 percent, and the anti-capitalist Left Party got 8.6 percent. The anti-euro Alternative for Germany had 4.7 percent. Merkel's score compared to Kohl's 43.8 percent in December 1990, two months after reunification of East and West Germany. She's now set to follow Adenauer, Kohl and Helmut Schmidt as a three-term leader. While Merkel said that "it's too early to say precisely how we proceed" with coalition building, she will probably be forced into a coalition with her Social Democratic or Green party rivals to ensure a stable government. Coalitions are the rule in the German political system and negotiations usually last from four to six weeks. "It's up to her to work for a majority," said Steinbrueck. SPD Concerns Not many in the SPD are pushing for a repeat of the grand coalition, said Frank-Walter Steinmeier, the former foreign minister who now leads his party's caucus in the Bundestag. He said he'd rather stay in his current role. As a junior partner, the party would effectively be putting its fate in her hands. Their partnerhip with Merkel ended with the SPD's worst postwar result, 23 percent, a tally many in the party blame on the grand coalition and an inability to win credit for policies in a Merkel government. Merkel was first elected in 2005, yet it was the euro-area debt crisis spreading from Greece from 2009 that dominated her second term and may dictate her political legacy. As Germany became the biggest contributor to 496 billion euros of rescue aid, with the German chancellor insisting in return on reforms to make Europe more competitive, the continent was divided into a rich north and weaker south. That made Merkel resented in countries such as Greece and Portugal; in Germany it created an opening for the AfD, which was founded earlier this year, to vie for its first parliamentary seats. German Stocks Germany's benchmark DAX Index has returned 68 percent since Merkel became chancellor in November 2005, compared to a 15 percent decline in the Euro Stoxx 50. In the same period, the government bonds returned 40 percent; inflows amid the region's crisis resulted in investors occasionally paying to hold its two-year debt. "With the strong result for Merkel, Germans have again demonstrated their overwhelming support for pro-euro policies," said Holger Schmieding, chief economist at Berenberg Bank in London. Early projections gave Merkel's CDU-led bloc a one-seat majority in the lower house, only the second time since the war that a chancellor could have ruled without need of a coalition partner. The first was CDU Chancellor Konrad Adenauer in 1957. Merkel's result ensures she has "become a German icon like Adenauer," said Nickel at Teneo Intelligence. Yet with a strengthened caucus and the prospect of a resentful coalition partner, she'll have to depend on "100 percent loyalty of her lawmakers in further moves in the debt crisis," he said. Source : bloomberg
