Poll: Merkel wins in Germany
By Steve Goldstein, MarketWatch
Last Update: 1:17 PM ET Sept. 18, 2005
LONDON (MarketWatch) -- German voters on Sunday have, by a narrower-than-expected margin, picked Angela Merkel to replace Gerhard Schroeder as chancellor of Europe's largest economy, according to exit polls.
But the early indicator also leaves open the possibility that Merkel's Christian Democratic Union may have to unite with Schroeder's Social Democrats to form a governing coalition, rather than the liberal Free Democrat party she prefers to govern with.
Sunday evening, Merkel, the head of Germany's Christian Democratic Union, said she had hoped for a better result, but she would lead a new government. She admitted that she wouldn't be able to form a government only with the Free Democrats as she wanted, but said her party was the "strongest force."
However, Franz Muentefering, chairman of the SPD, called the result a "personal defeat" for Merkel and said the SPD would try to lead a government. Muentefering ruled out a coalition with the Left Party.
An early exit poll, conducted by ARD television, showed the CDU/CSU with 35.5% of the vote, with the SPD on 34%, a much closer vote than election polls have predicted.
Polls heading into the election put the CDU/CSU shares of the vote at more than 40%.
It would also leave open the possibility of the SPD holding onto power if they ruled with the Green Party and a new party called the Left Party, but both the SPD and the Left parties have previously said they wouldn't rule together.
A so-called "traffic-light coalition" between the SPD, the Free Democrat party and the Green party could also potentially keep Schroeder in power.
Merkel, who grew up in East Germany, is set to become Germany's first female chancellor.
The vote comes with German unemployment at its highest levels since World War II, and with the German economy not growing at all in the second quarter compared to the first.
Schroeder was first elected in 1998 and was put back into office in 2002.
The German stock market has rallied since Schroeder called an election in late May, after losing the SPD stronghold of North Rhine-Westphalia in a regional election.
However, the DAX 30 benchmark index weakened last week on concerns over a grand coalition government between the two major parties.
The euro too has been hurt by concerns over a grand coalition.
"Such a government would have a huge majority in the lower house and should face few difficulties getting the upper house on side, but such a government would be likely to be racked by divisions and would probably find making policy decisions difficult," said Klaus Baader, an analyst for Merrill Lynch.
The CDU already has control of the upper house of parliament.
Complicated system
Under Germany's complicated voting rules, each voter gets two votes - one for a local representative, and one for a party.
There will be at least 598 members elected to the lower parliament, but due to what are called overhang rules, there may be more.
Overhang rules allow for a party to have more seats in parliament than the percentage won from the party list vote, should the party do particularly well in local elections.
The overhang rules allowed Schroeder to remain in power in 2002.
Steve Goldstein is MarketWatch's London bureau chief.
By Steve Goldstein, MarketWatch
Last Update: 1:17 PM ET Sept. 18, 2005
LONDON (MarketWatch) -- German voters on Sunday have, by a narrower-than-expected margin, picked Angela Merkel to replace Gerhard Schroeder as chancellor of Europe's largest economy, according to exit polls.
But the early indicator also leaves open the possibility that Merkel's Christian Democratic Union may have to unite with Schroeder's Social Democrats to form a governing coalition, rather than the liberal Free Democrat party she prefers to govern with.
Sunday evening, Merkel, the head of Germany's Christian Democratic Union, said she had hoped for a better result, but she would lead a new government. She admitted that she wouldn't be able to form a government only with the Free Democrats as she wanted, but said her party was the "strongest force."
However, Franz Muentefering, chairman of the SPD, called the result a "personal defeat" for Merkel and said the SPD would try to lead a government. Muentefering ruled out a coalition with the Left Party.
An early exit poll, conducted by ARD television, showed the CDU/CSU with 35.5% of the vote, with the SPD on 34%, a much closer vote than election polls have predicted.
Polls heading into the election put the CDU/CSU shares of the vote at more than 40%.
It would also leave open the possibility of the SPD holding onto power if they ruled with the Green Party and a new party called the Left Party, but both the SPD and the Left parties have previously said they wouldn't rule together.
A so-called "traffic-light coalition" between the SPD, the Free Democrat party and the Green party could also potentially keep Schroeder in power.
Merkel, who grew up in East Germany, is set to become Germany's first female chancellor.
The vote comes with German unemployment at its highest levels since World War II, and with the German economy not growing at all in the second quarter compared to the first.
Schroeder was first elected in 1998 and was put back into office in 2002.
The German stock market has rallied since Schroeder called an election in late May, after losing the SPD stronghold of North Rhine-Westphalia in a regional election.
However, the DAX 30 benchmark index weakened last week on concerns over a grand coalition government between the two major parties.
The euro too has been hurt by concerns over a grand coalition.
"Such a government would have a huge majority in the lower house and should face few difficulties getting the upper house on side, but such a government would be likely to be racked by divisions and would probably find making policy decisions difficult," said Klaus Baader, an analyst for Merrill Lynch.
The CDU already has control of the upper house of parliament.
Complicated system
Under Germany's complicated voting rules, each voter gets two votes - one for a local representative, and one for a party.
There will be at least 598 members elected to the lower parliament, but due to what are called overhang rules, there may be more.
Overhang rules allow for a party to have more seats in parliament than the percentage won from the party list vote, should the party do particularly well in local elections.
The overhang rules allowed Schroeder to remain in power in 2002.
Steve Goldstein is MarketWatch's London bureau chief.
