There are two ways of looking at the results of the German election. The positive and optimistic view is that Angela Merkel, despite being faced with a  number of challenges, was re-elected as Chancellor for a fourth consecutive term, meaning that she has equalled Helmut Kohl’s and Konrad Adenauer’s record of winning four elections in a row. Both Adenauer and Kohl – Christian Democrats like Merkel – were political giants, great Chancellors, and remarkable statesmen. I have no doubt that history will also judge Merkel in the same light.

Furthermore, the fact that Merkel will be Chancellor for the next four years is good news for Europe and the world. Her extensive political experience, her wise sense of judgement, her refusal to go down the populist route, her analytical mindset, and her strong belief in European values, multilateralism and the liberal world order will be of great benefit to both the international community and the European Union. This is especially so when one considers that the US under Donald Trump is no longer the country it once was, and it now has a different set of international priorities.

Additionally, Merkel’s re-election means that together with newly-elected French President Emanuel Macron, the German Chancellor can help bring about the reform of the European Union and the eurozone and also ensure that the EU plays an increasingly important global role in areas such as climate change, fighting terrorism, promoting good governance and the rule of law, tackling the migration crisis, as well as standing up to an increasingly assertive Russia and pushing diplomatic initiatives aimed at easing global tensions.

The other – pessimistic – way of looking at the German election results is that both Merkel’s Christian Democrats (CDU/CSU) as well as their outgoing coalition partner, the Social Democrats (SPD) – the two mass centrist parties of the post-war period – suffered heavy losses compared to their share of the vote four years ago. At just under 54 per cent, the combined share of the vote of these two parties fell to its lowest level since 1949. To make matters worse, the Alternative for Germany, a right-wing populist party, ended up as Germany’s third largest party and became the first movement of its type to enter the country’s Parliament, largely as a result of public anger and fear over migration.

The result could dent Merkel’s authority and shift the parliamentary agenda to the right. Now that the Social Democrats have decided to end their grand coalition with the CDU/CSU, Merkel’s only option is to join a coalition with the pro-business libe­rals (FDP), who are back in Parliament after having lost their seats four years ago, and the centre-left Greens. The problem, however, is that the Greens and liberals have different outlooks on Europe and migration, and it will be quite a challenge for Merkel to reconcile such views. If the new German government lacks a clear direction over the future of Europe this could hinder Merkel’s efforts to reform the EU together with Macron.

The Social Democrats are absolutely right to go into Opposition and end their grand coalition with the Christian Democrats

The breakdown of the German election popular vote is as follows: CDU/CSU (Christian Democrats): 33 per cent (-8.5); SPD (Social Democrats): 20.5 per cent (-5.2); Alternative for Germany: (Populist right-wing): 12.6 per cent (+7.9); FDP (Liberals): 10.7 per cent (+6); The Left (Radical Left): 9.2 per cent (+0.6); The Greens: 8.9 per cent (+0.5).

So it is quite clear that despite the booming German economy, the Christian Democrats and the Social Democrats lost ground to the right-wing Alternative for Germany as well as the Liberals – who have turned slightly to the right over migration and have calmed their enthusiasm for further eurozone integration, but nonetheless remain firmly pro-European.

Merkel’s CDU/CSU remains by far the largest party in Germany and has the responsibility to govern for the next four years, but there is no denying the fact that it lost considerable support, mainly because of the country’s migration crisis. The challenge for Merkel is therefore to regain the support of those who deserted her by addressing their concerns, but without resorting to populism or to cheap politics.

The Social Democrats’ abysmal performance, on the other hand, convinced their leader Martin Schulz to end his party’s coalition with Merkel and to return to the Opposition benches. Like many centre-left parties in Europe, the Social Democrats need to focus on where they are heading, review their policies and priorities and try to figure out just why so many of their supporters are deserting them. The fact that the Left Party, which consists of former left-wing Social Democrats and former Communists, once again got around nine per cent of the vote should be a cause for concern for Schulz and his party.

The Social Democrats, however, are absolutely right to go into Opposition and end their alliance with the Christian Democrats. The risk of a grand coalition between two large centrist parties is always that fringe or populist parties can end up becoming the country’s official Opposition, thus gaining respectability. This is what happened in Austria with the right-wing Freedom Party, and this is what would have happened in Germany with the Alternative for Germany, now the country’s third largest party, if the Social Democrats remained in government.

We can now expect a period of negotiations and horse-trading aimed at forming a three-party coalition. Chancellor Merkel has said she expects a new government to be formed by Christmas; in the meantime, however, Germany will continue to be governed by the outgoing CDU/CSU-SPD grand coalition. Such a situation is normal for Germany, which is used to putting together coalition governments, and should not be interpreted as a sign of instability.

Reaching an agreement between the CDU/CSU, Liberals and Greens will be challenging as there is no precedent for such a three-party coalition at national level. Naturally, all parties will have to make compromises; that is what politics is all about, after all. However, if there is one person who can forge a consensus, it is Angela Merkel, and I am confident that she will be successful in putting together this new coalition.

The mainstream parties’ main challenge now is how they should react to the emergence of the populist right, now that it is represented in Parliament. Many of the parties will be tempted to tilt towards the right in an attempt to erode support for Alternative for Germany. The CSU, which is the CDU’s sister party in Bavaria, certainly is, as it is traditionally the more conservative of the centre-right bloc, and it lost considerable ground to the populists in the Catholic state – which witnessed a huge influx of migrants in the past two years.

The important thing is that while the centre parties address people’s concerns about migration, even adopting a more hardline position where this is necessary, Germany continues to be a beacon of hope for the entire world and remains outward-looking and committed to internationalism. It is also essential that Germany continues to play a key role in reforming the EU and in raising Europe’s voice on the world stage. I am sure that despite a number of challenges, Germany under Chancellor Merkel will do just that.

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