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Friday 29th of August 2008
September 19, 2005

German election results cause investor concern


by Brian Turner
German election results cause investor concern

The German election on Sunday, the outcome of which is seen key to economic reform in Germany, ended in a virtual stalemate, with Angela Merkel’s Christian Democrats claiming only three more seats in parliament than Gerhard Schroeder’s Social Democrats.

Each side is claiming victory, and a mandate to rule, even though neither has enough votes to form a majority with their usual allies.

Most analysts think that the eventual outcome will be a “grand coalition” government between the two main parties, but personal animosity between Schroeder and Merkel spurring hostility between the parties, negotiations could take weeks.

The financial markets reacted to the outcome of the election with declines on Monday. German stocks fell by 1.7 percent, while the euro reached a 7-week low in relation to the US dollar.

Analysts feel that economic reform in Germany will be slowed no matter what sort of coalition government emerges, and that the uncertainty about what the final outcome will be will not benefit the German economy.

The parties have until October 18, when parliament must meet, to form a government.

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