Germany: Merkel’s era drawing to an end – Nordea Markets

In Germany, the CSU is the sister party of the CDU and the two parties have formed a common parliamentary group in the German parliament since 1949, points out Jan von Gerich, Research Analyst at Nordea Markets.

Key Quotes

“Even if the two parties are separate, the CSU operates only within the state of Bavaria, while the CDU operates in the other 15 German states. Fracturing of the co-operation between the two parties could change this, and thus change the political landscape considerably in Germany.”

“Neither the CDU nor the CSU should be eager to go to new federal elections, given that their combined support has been falling lately. Forming a government proved very difficult already after last year’s elections. Further, the collapse of the pact between the two parties would raise a lot of uncertainty for both parties. After all, an entry by the CDU in Bavaria would eat into CSU’s popularity there and vice versa for the CDU outside Bavaria.”

“However, the CSU is already in the midst of another election campaign. There will be state elections in Bavaria on 14 October, where the CSU is fighting to retain its absolute majority amidst the rise of the AfD. The recent disputes are no doubt partly due to the vicinity of the Bavaria elections, and the CSU may be unwilling to make any major compromises with the CDU before the October vote.”

“Chancellor Merkel looks unlikely to run again in federal elections, and her approval rating has fallen to close to 50%. Even if the underlying differences between the CDU and the CSU have been brewing for a long time, she has been able to hold the coalition together with her pragmatic approach. Her successor may not be able to unite the two parties, especially if the escalation in the relationship between the two is the reason for new elections.”

“Forming a pro-European government proved difficult already after the federal elections of September 2017. It is set to become even harder going forward, especially with Merkel out of the picture. The current government has more than three years left of its term, so Merkel may be in the picture for still a while, unless of course the current government collapses and early elections follow.”