Good news on the political front: Angela Merkel has (finally) secured a fourth term after the SPD voted to join her CDU/CSU bloc in another coalition.
The “yes” margin was apparently wider than expected, but this is still something of a Pyrrhic victory. The September election clearly showed that large swaths of the electorate are disaffected and AfD’s performance was particularly disconcerting for obvious reasons.
“When the Social Democrats first joined Ms. Merkel’s conservatives in government, in 2005, they received 34% of the vote [but] after the SPD’s second stint as a junior coalition partner, over the past four years, that share fell to 20%,” the New York Times reminds you this morning, adding that “the arrival of the anti-immigration AfD in the national Parliament after the September vote has made forming a government much harder.”
In the end, 66% of SPD members supported the coalition. As Bloomberg notes, “the ballot was both the final hurdle and the last option for a Merkel-led majority government after the pro-market Free Democrats, a CDU ally in the past, scuttled a first set of coalition talks.”
“I congratulate the SPD on this clear result and look forward to further cooperation for the welfare of our country,” the CDU tweeted on behalf of the big boss once the results were in.
“We now have clarity,” interim SPD chairman Olaf Scholz told reporters. “The SPD will join the next government.”
AKK called it “a good decision for Germany”:
Freue mich nach über breite Zustimmung der SPD Mitglieder zum Koalitionsvertrag. Ist eine gute Entscheidung für Deutschland
— A. Kramp-Karrenbauer (@_A_K_K_) March 4, 2018
Unfortunately, this means that AfD is now the official opposition party – and I say “unfortunately” because as it turns out, Germany doesn’t have a great history with far-right, anti-immigrant, crazy nationalists. Sure enough, they were on Twitter making fun of SPD immediately:
Again, fingers crossed that movement fizzles – you don’t want ultra-nationalist sentiment starting to bubble to the surface again in Germany.
The bottom line is that today’s vote was a potential stumbling block and the ballot had a non-negligible amount of event risk built into it for markets. This is a market-friendly outcome and sets the stage for a more integrated Europe.