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This year’s German election: Angela Merkel’s re-election might not be as certain as the betting markets think

January 30th, 2017

Latest German polls

Nick Palmer on the other big European contest in 2017

The general assumption that Merkel is certain to be re-elected as Chancellor after the elections later this year is reflected in the betting odds. At the time of writing, her Betfair odds are 1.73. However, it’s always a good idea for punters to check that assumptions remain valid.

The surprise selection of Martin Schulz as her Social Democrat (SPD) challenger has produced an immediate bump in SPD ratings – every poll taken since the decision has seen them up by 1-3 points, and they are now close to the last election level. Schulz differs from the expected alternative (Gabriel) in several ways: he is not a member of the Government so can criticise Merkel more easily; he is a sharp-edged speaker with a knack of getting in the headlines; he is more obviously pro-European at a time when many Germans think it important to rally round the EU. Most importantly, he is a bit harder to see as part of the traditional establishment which is struggling in every country.

But is there a path to victory for him? Yes, but not an easy one. Above are the current polls:

Leaving aside INSA, which always shows Merkel’s CDU lower (and the AfD higher), the CDU is on a stable 36% or so, which would be a drop of over 5% from last time. It looks as though the free-market centre-right FDP will get back in, on 6-7%. Against that, Schulz would have the SPD on say 24%, and the Greens and Left on 9-10% each. The old assumption that the SPD would not govern with the help of the ex-communist Left has been eroding. There have been fairly harmonious partnerships at state level, the communist GDR-era leaders have mostly retired, replaced by more generic leftists, and the Cold War is starting to seem yesterday’s issue. Schulz, unlike his predecessors, has not quite ruled it out. So on current polling he could potentially have a slim lead.

This leaves out the AfD, who are down from their peak as the refugee crisis is perceived to have eased slightly, but still on 11-14%. However, they are deeply divided internally and seen as dangerous rivals by the CDU, who would not govern in 2017 on the basis of their support (perhaps, like the Left, they will one day be seen as “salonfaehig” – suitable to be welcomed into the living room – but they’re some way off). If the only basis for a Merkel majority was AfD support, she would step down, like her Swedish Conservative counterpart, who preferred to yield power to the Social Democreats rather than carry on with far-right Sweden Democrat support.

Nonetheless, an SPD/Left/Green government would be well short of a majority on these figures, so unless they pick up a further 6% or so from the centre or right, it isn’t going to happen. What, though, if the FDP drop by just a single point and fall under the 5% threshold again? At that point, a CDU-led government with 35% against 43% for the centre-left will start to look less of a slam-dunk. A CDU-SPD coalition still looks likely – but might it be under a new leader? Or could one imagine an SPD-FDP-Green minority government?

Possibly – but in my view probably not. The answer to the question is, perhaps surprisingly, that this is one occasion when the markets are probably underestimating the favourite: she is, under most likely circumstances, likely to survive with a reduced majority, and anything above 1.4 is probably a bet worth considering. But laying Schulz may be the better strategy, as it covers the possibility of a really bad CDU result leading to a new CDU leader.

Nick Palmer was MP for Broxtowe 1997-2010, and works as a translator from German, giving him longstanding daily contact with the German media.