David McNamara: Easing of political uncertainty can help support the European economy
CDU leader Friedrich Merz is primed to become Germany's new chancellor. Picture: AP Photo/Markus Schreiber
The federal elections in Germany, as expected, yielded a victor in the centre-right CDU/CSU, with Friedrich Merz expected to be the next Chancellor. His party just failed to reach the 30% level pre-election polls suggested, while far-right and left parties made strong gains. The incumbent SPD fell to its worst result in decades, but may yet end up in Government as the junior partner in a grand coalition.
The result drove a rally in the euro initially, rising above $1.05 against the dollar initially, before slipping back below that threshold, with investors perhaps pricing in some upside growth risk from the change of Government in Europe’s largest economy. Alongside the relative calm in the French system following the passing of its fiscal budget recently, the German election means key political risks to the Eurozone outlook have subsided for now.
