Nordea Europe analyst Holger Sandte points to likely Merkel win in German elections

As the 22 September elections in Germany shape up to be the most important political event in Europe this year, Nordea’s chief European analyst Holger Sandte has outlined the Nordic bank’s view on the likely winners and the impact on investors.

What is the most likely outcome of the election?

Angela Merkel (pictured) is in a pole position and it is likely that she will continue as chancellor for a few more years. As I see it there are two major scenarios. Either we will get a pretty unchanged situation from today with the Christian Democrats (CDU/CSU) in coalition with the liberal party (FDP). The other option is a Grand coalition of CDU/CSU and the Social Democrats (SDP). Either way Merkel would be a chancellor.

What will the outcome mean for the financial markets?

We consider a new term for the current CDU/CSU/FDP government as slightly more likely than a Grand Coalition. However, we don’t expect any of these coalitions to change the German economic policy that much or give any fiscal stimulus to the domestic economy. The German approach to euro crisis management will probably remain cautious.

Does the election imply any risks for the financial markets?

The main risk outcome of the election is a center-left coalition (SPD and Grüne) relying on support from the far-left. Such a government would be potentially unstable and inexperienced when it comes to euro-crisis management. Another more temporary risk outcome would be an inconclusive result leading to several months of negotiations with an uncertain outcome.

To read Sandte’s full analysis click here:


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