In Short: Surprise unlikely in German elections

09-06-2017

The past year brought big surprises on the geopolitical front, Brexit and President Trump’s victory the most notable. But 2017 has seen a bit of a reversal of this so-called populist wave. Liberal Moon Jae-in won the South Korean election for president in early May, followed a few weeks later by centrist Emmanuel Macron’s decisive defeat of nationalist Marine Le Pen in France’s elections.

Now comes Germany’s national elections, where we anticipate the outcome will be much the same. Chancellor Angela Merkel appears set to win a fourth term on Sept. 24, her center-right Christian Democratic Union having opened a sizeable lead over her main challenger, Martin Schulz of the center-left Social Democratic Party. But her road to likely victory actually was laid over the spring and early summer amid infighting among key members of the rising far-right Alternative for Germany (AfD, for Alternative fur Deutschland) party.

The AfD may still garner enough votes to gain its first seats in Germany’s Bundestag, the parliamentary body that oversees the executive branch’s legislative initiatives. But it’s difficult seeing the AfD as being anything more than an annoyance for the time being, its popularity having faded somewhat since last year’s rabid anti-immigration protests. Abetting Merkel’s bid is a German economy that, like the rest of the euro area, continues to improve.

Brexit and Trump taught us never to say never. But our sources think the longtime chancellor’s position should be secure, easing market concerns about a potential disruption.