Merkel Wins Bellwether Vote As Coalition Partner Founders; Anti-Euro Party Ascent Could Derail Coalition

There was good and bad news for Angela Merkel as today's exit polls from the Bavaria (GDP of $619 billion, bigger than the output of Poland or Austria) state elections - the bellwether vote ahead of next weekend's federal elections (previewed here) - were released. On one hand, the CDU's sister party, the Christian Social Union or CSU, was set to win a majority in Bavarian state elections (where the CDU does not contest the ballot), giving the incumbent a boost as she heads into the final week of her campaign before a national vote Bloomberg reports.

"With 49% of the vote, the CSU regained sole control of the country’s second-most populous state, according to ZDF television projections based on partially counted ballots. Led by Prime Minister Horst Seehofer, the CSU rebounded from 2008 when its worst result in more than 50 years forced it into coalition with the Free Democrats... The opposition Social Democrats took 20.7 percent, while their Green party allies had 8.5 percent.

That was the good news: the bad news is that the FDP, Merkel’s national coalition partner, won 3 percent, below the 5 percent hurdle required to win seats in parliament. "This was a painful defeat in Bavaria, said FDP chairman, Vice Chancellor and Economics Minister Philipp Roesler in a press conference on N-TV." So while Merkel's block is accelerating into the elections, it is unclear if it will be able to make up for the lost popularity of its combined coalition.

But the surprise of the day was the strong showing of the The Free Voters, who want Greece to exit the euro, oppose euro-area bailouts and want to trim the power of the European Union, won 8.5 percent, the ZDF projection showed. It is precisely the ascent of anti-Euro powers that could upset the final election "arithmetic" in jeopardy.

As Reuters reports, "a new anti-euro party could enter Germany's national parliament after an election next week, pollsters said on Sunday, potentially upsetting Chancellor Angela Merkel's hopes of returning to power with her current coalition partner." The Alternative fuer Deutschland (AfD), which calls for an "orderly dismantling" of the euro zone, gained one point to 4 percent in an Emnid poll published on Sunday, taking it close to the 5 percent threshold needed to enter parliament. If the AfD, which has quickly gained momentum after being founded in February, won seats in parliament, Merkel would struggle to get a centre-right majority with the liberal FDP, making a 'grand coalition' with the Social Democrats (SPD) the more likely scenario.

While Merkel remains popular in Germany and recent polls have shown her coalition ahead of the main opposition SPD and Greens, the AfD could upset coalition arithmetic if it gets in.


Merkel reiterated at the weekend that she would not enter a coalition with the AfD after the election, telling a regional newspaper: "This question does not arise."


Leading pollsters said the AfD could muster enough support to enter the assembly thanks to its perceived links to the far-right and a protest vote rather than on the back of its Eurosceptic views which have not found much resonance in a country with a pro-European political consensus.


"The AfD didn't stand a chance simply as an anti-euro party," said Manfred Guellner, head of Forsa polling institute, in top-selling newspaper Bild.


"But now it's catering to a right-wing populist potential that has always been latent in Germany and that could help it over the 5 percent hurdle," he added.

All of this is even more troubling should the FDP continue to lose popularity as today's Bavaria election showed.

Aside from Bavaria, the broader polling shows that support for Merkel at the national level is flat, if not declining:

Merkel’s Christian Democratic bloc dropped by a percentage point in Emnid and INSA national polls published today to 39 percent and 38 percent respectively. The SPD under Steinbrueck gained a point to 26 percent in the Emnid poll and dropped a point to 27 percent in the INSA poll. The Greens lost a point, falling to 10 percent in the Emnid poll and were unchanged at 11 percent according to INSA. The Free Democrats, with whom Merkel wants to ally again after Sept. 22, were unchanged in both polls with Emnid giving them 5 percent and INSA 4 percent.

Finally, it is worth noting that in the economic wastleland of Europe whose recession has double-dipped and may soon be on the verge of a triple-dip recession, that the "Free State of Bavaria" is a major outlier, with an unemployment rate of a tiny 3.8%, compared to 6.8% for the overall country, not to mention the double digit horror stories in places like Spain and Greece.  “What really makes me happy is that we have eliminated youth unemployment,” Seehofer said before the vote. Perhaps Bavaria would be willing to accommodate some of the youth unemployment from places like Greece and Spain, where it has recently been tracking at roughly 60%.


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