German Chancellor Angela Merkel’s spectacular election victory last Sunday is a strong endorsement of her handling of the eurozone crisis and her management of Germany’s economy. Her Christian Democratic Union/Christian Social Union secured its best result in over 20 years and was just five seats short of securing an absolute majority.

Ms Merkel becomes only the third German politician to win a third term as Chancellor. Two other Christian Democrats did so before: Konrad Adenauer, who was Chancellor from 1949 to 1963, and Helmut Kohl, from 1982 to 1998.

Considering that most governments in Europe have been defeated at the polls since the eurozone crisis erupted, the fact that Ms Merkel’s party increased its share of the vote from 33.8 per cent to 41.5 per cent is remarkable and a personal victory for the Chancellor. She stands out as a ‘safe pair of hands’ and her cautious, moderate approach seems to have struck a chord with German voters.

The failure of the Liberal FDP, Ms Merkel’s coalition partner until now, to cross the five per cent threshold to gain representation in Parliament, however, is a setback for the Chancellor.

It also represents a major shift in German politics and marks the first time since 1949 that the Liberals will not be present in the German Parliament.

The rise of the Eurosceptic Alternative for Germany, which came close to the five per cent threshold – it got 4.7 per cent of the vote – is another concern for Chancellor Merkel and shows some voter discontent with German bailout money for the eurozone and further integration of the single currency bloc.

Ms Merkel is now expected to seek a grand coalition with the centre-left Social Democrats, her main election rivals, who received only 25.7 per cent of the vote, a slight increase of 2.7 per cent since 2009, when they got their worst ever result. According to opinion polls, most Germans are in favour of such a grand coalition, which now seems almost inevitable.

There will, no doubt, be plenty of negotiations between Ms Merkel and the Social Democrats before any coalition agreement can be reached. Indeed, many Social Democrats are wary of entering into another pact with the Christian Democrats; the last time a grand coalition was formed in 2005, the Social Democrats suffered badly four years later at the polls.

However, the German public’s support for such a grand coalition and Ms Merkel’s strong performance in this election should persuade the Social Democrats to enter into government with the Chancellor. Concessions will have to be made by both sides. For example, while the SPD might drop its electoral pledge of higher taxes, Ms Merkel could change her opposition to the introduction of a national minimum wage. A government that includes the Social Democrats will also be expected to push harder for economic growth measures in dealing with the eurozone’s problems.

Should negotiations on a grand coalition collapse, Chancellor Merkel could possibly attempt to form an alliance with the Greens, whose share of the vote declined from 10.7 per cent to 8.4 per cent. Leading figures from both parties, however, have already virtually ruled this out, citing too many policy differences.

It is in Europe’s interest to have a strong stable government in Berlin as soon as possible and a grand coalition seems the best option available to guarantee this stability. There is no reason to believe that a new German government that includes the Social Democrats will be any less committed to the eurozone’s long-term future than the outgoing one.