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16 Sep 2013
Merkel position strengthened by Bavaria results, Sunday’s elections crucial
FXstreet.com (London) - As German approaches Sunday’s general election, exit polls from key state elections in Bavaria look positive for Angela Merkel’s Christian Social Union (CSU) party, with the DAX jumping to record highs in anticipation of a solidifying of Merkel’s position, hitting all time highs at 8,602, up 1.09 percent on opening.
Polls suggest that the CDU has taken 49 percent of the vote, regaining its majority at the state level.
At 3.8 percent, Bavaria has the lowest unemployment rate Germany – the national average is 6.8 percent.
The region is also an industrial powerhouse, home of car makers BMW and Audi.
But, while Merkel and the CSU are in an increasingly strong position heading into the elections, things are not looking as positive for her centre-right coalition partners, the Free Democrats (FDP). FDP support evaporated in the Bavarian elections, gaining just 3 percent of the vote, falling short of the 5 percent threshold that it would need for assembly seats.
If the FDP fails to surpass the 5 percent threshold in next week’s elections, it will be forced into a “Grand Coalition” between the CPD, the CSU and the Social Democrat SPD party. However, neither the SPD nor the markets would like to see a return of a “Grand Coalition” – it proved unworkable in its last incarnation in 2009.
Draghi fearful of fragility
Speaking at a German industry event this morning, ECB president, Mario Draghi, underlined fears that the European recovery remained fragile. “My main message is that we have made significant progress on the first step, stabilising the euro area. But there is still work to do to transform this achievement into higher growth and employment. Strengthening the euro area through sustainable policies, higher competitiveness and stronger common institutions is therefore our priority for today.”
With Germany continuing to underpin any form of European stability, both at the core and at the troubled periphery, the German elections will be crucial to market stability, with any result undermining Merkel and the CDU’s position likely to knock the legs out from under the DAX and the European equities rally.
Polls suggest that the CDU has taken 49 percent of the vote, regaining its majority at the state level.
At 3.8 percent, Bavaria has the lowest unemployment rate Germany – the national average is 6.8 percent.
The region is also an industrial powerhouse, home of car makers BMW and Audi.
But, while Merkel and the CSU are in an increasingly strong position heading into the elections, things are not looking as positive for her centre-right coalition partners, the Free Democrats (FDP). FDP support evaporated in the Bavarian elections, gaining just 3 percent of the vote, falling short of the 5 percent threshold that it would need for assembly seats.
If the FDP fails to surpass the 5 percent threshold in next week’s elections, it will be forced into a “Grand Coalition” between the CPD, the CSU and the Social Democrat SPD party. However, neither the SPD nor the markets would like to see a return of a “Grand Coalition” – it proved unworkable in its last incarnation in 2009.
Draghi fearful of fragility
Speaking at a German industry event this morning, ECB president, Mario Draghi, underlined fears that the European recovery remained fragile. “My main message is that we have made significant progress on the first step, stabilising the euro area. But there is still work to do to transform this achievement into higher growth and employment. Strengthening the euro area through sustainable policies, higher competitiveness and stronger common institutions is therefore our priority for today.”
With Germany continuing to underpin any form of European stability, both at the core and at the troubled periphery, the German elections will be crucial to market stability, with any result undermining Merkel and the CDU’s position likely to knock the legs out from under the DAX and the European equities rally.