Merkel’s Christian Democratic bloc took 41.5% to 25.7% for the Social Democrats of Peer Steinbrueck in yesterday’s election, according to results from all 299 districts. That leaves her short of a majority and needing a coalition partner to govern Europe’s biggest economy. Outcome will give Merkel strong hand in coalition talks with other major parties even if there is some short-term uncertainty about who her partners will be. Merkel’s FDP coalition partner took only 4.8%, below the 5% hurdle needed to win seats in the Bundestag. Therefore the grand coalition with SPD remains most likely. This coalition would have large parliamentary majorities in both houses of parliament.
/ Overall, Merkels clear victory should be slightly positive for euro and European shares. As for power producers – Chancellor Angela Merkel has vowed to change clean-power subsidy laws after the election and decrease subsidies for clean-power generators. However the possible SPD coalition partner may not support this. On the other hand, the grand coalition will likely try to boost prices of CO2 allowances leading to higher electricity prices. This could be supportive for low-emission energy producers such as Verbund, (16,51 EUR, -0,64%), EDF or (13,42 EUR, -0,70%) and CEZ. Nevertheless, we would better wait on a further progress in coalition talks. /