When is Germany's next election?
Germany’s next election is on September 26 2021, as determined by the current Federal President. The results of the vote will elect a new federal parliament – the Bundestag – including a new Chancellor. Alongside this vote are several local and state elections.
A Bundestag election – to designate the next representative of the Federal Republic of Germany – are held between 46 to 48 months after the previous electoral term started. In this case, the term started on October 24 2017.
Who are the German Chancellor candidates?
The main parties in the running are current Chancellor Angela Merkel’s party the Christian Democrats (CDU) the Greens and the Social Democrats.
After 16 years in office, Merkel is stepping down, which has created uncertainty over who could get into power next. The current candidates for Chancellor are:
- Armin Laschet, the Christian Democrats
- Annalena Baerbock, the Greens
- Olaf Scholz, the Social Democrats
According to recent polls, Baerbock is the current favourite. She’s stated that while she’s never been Chancellor or even a minister, she’s committed to giving the country a fresh start. Since it was announced Baerbock would be running, the comparisons between her and Merkel have been rife.
However, Laschet has also been compared to his CDU predecessor due to their similar moderate and centrist views. While Laschet is promising change, in many ways he represents continuity for the country. Something that, from judging the polls, isn’t overly popular.
Due to the German voting system, it is likely that two of the candidates could end up governing together. Coalition governments are extremely common in the Bundestag. It is possible that The Greens and Social Democrats could form a government to oust the CDU.
How could each German political party affect market sentiment?
Each parties’ policies will influence the sectors and companies that are likely to benefit from their time in office, as well as the economic policies that will shape the country for the next few years.
The Greens – current favourites – were originally a radically left party but have gradually become more mainstream. They remain focused on climate change, and are a pro-European, refugee-friendly party. If the Greens win the German election, the policies are likely to provide a boost to companies focused on renewable energy and electric vehicles, as well as companies that can aid in the digitalisation of Germany.
The CDU is historically the party that has occupied the Chancellor’s office the most – for 57 out of 72 years. Although typically a conservative party, under Merkel it has moved increasingly to the political centre. Laschet is known to have a softer line on Russia and China than the Greens, which could promote growth among German export industries. He’s also a lot more reserved on climate change – believing protection should not inhibit German production.
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Markets to watch
The markets to watch going forward are the Euro, German stocks and indices – including the DAX.
Here are some of the financial markets that are likely see volatility in the run up to and after the result of the German election.
Major forex pairs involving the Euro could see volatility in the lead up to and aftermath of the election. These include:
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Depending on which party gets into power, certain groups of stocks are likely to benefit. For example, the Greens would boost sustainability stocks, while the CDU would focus on German manufacturing and exports. This could include the likes of Encavis and RWE for renewable energy, and Volkswagen Group, Daimler and Bosch.
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Germany’s leading stock index, the DAX, will likely bear the brunt of any election volatility. Other Deutsche Borse indices could also see movements, such as the MDAX, TecDAX and SDAX.
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How does Germany elect their chancellor?
When German citizens vote, they will not be voting directly for their Chancellor. Instead, the top candidate from the party that wins the most votes will be presented as the Chancellor by the Federal president. The newly elected parliament then confirms the Chancellor by ballot.
Germany has a notoriously complicated system for electing the Bundestag. It combines elements of both direct and proportional representation.
There are 598 seats in the Bundestag, and the seats are split 50:50 between two systems of voting.
- The Erststimme or first vote: a first-past-the-post system in which the district representative is elected as an individual candidate. Voters choose their favourite, and every candidate who is elected will win a seat
- The Zweitstimme or second vote: using a proportional representation system, voters choose a political party to instead of a single candidate. The party with the largest vote gets the most seats and larger percentage of the overall Bundestag
The system allows votes to be split amongst parties. People can vote for one in the individual elections and a different party entirely in the second vote.
In order for a party to enter parliament, it must win a minimum of 5% of the votes. This has served to keep extremist groups out of parliament.