Country Risk

Post-election political shake-up makes German government formation challenging; unlikely to significantly change foreign policy or investment environment

25 September 2017

Key Points

  • Following the Social Democrats' announcement that they would end the grand coalition and go into opposition, Angela Merkel is left with only one viable option to build a government, an alliance between her centre-right Christian Democratic Union (Christlich Demokratische Union Deutschlands: CDU)/Christian Social Union (Christlich-Soziale Union: CSU), the liberal Free Democratic Party (Freie Demokratische Partei: FDP), and the Green Party, leaving the two smaller parties with significant leverage over the CDU/CSU.
  • Such a tripartite coalition would be exposed to internal divisions and a likely strong and active parliamentary opposition from the centre-left, the left, and the far right, probably increasing government instability in the new administrative term.

(109 of 1038 words)