Of course, there are plenty of difficulties lying in wait. As the FT’s Peter Spiegel and Alex Barker write, once a new German government is in place after this weekend’s election, fraught negotiations about Greece, Portugal, Ireland and the banking union will quickly return to the fore.
There are two main scenarios indicated by the polls. In both, Angela Merkel almost certainly remains chancellor. Figuring out what kind of government she might be leading, let alone what it might mean for the eurozone, is much less straightforward.
The first likely outcome is a continuation of the existing coalition of CDU and FDP in the Bundestag. Meaning, maybe, more of the same. Gavyn Davies describes it:
[Another CDU-FDP coalition government] would imply that the government would continue to lack a majority in the upper house, the Bundesrat, and would still contain a large number of euro-sceptic members. This has been a formula for painfully slow compromises on the euro, arriving only when the very survival of the single currency was at stake.
The other likely outcome is the CDU and FDP fail to win enough votes to form government together, but form a “grand coalition” with the centre-left SDP.
JP Morgan’s Alex White thinks this “grand coalition” is most likely, and perhaps more promising:
We maintain our call that Germany is heading towards a Grand Coalition; voters are interested in exploring electoral change, but the SPD has not delivered a convincing alternative message. More importantly, there is little sign that voters are willing to let go of the sense of economic security to which the CDU lays claim. This balanced perspective is reflected in the fact that a majority of voters say that a Grand Coalition is their preferred outcome – we expect them ultimately to get one.
White says while that might be tricky, it will work out for the better:
We think the negotiations around the formation of a Grand Coalition, if we get one, will be tough but that the political environment will remain constructive in the medium-term.
So, a potentially positive outcome.
Before you get carried away, however, here’s Wolfgang Munchau, pointing out that a grand coalition might in fact be horrendously unstable, mostly because of conflicting pulls on the SDP:
A grand coalition would only occur if the CDU and FDP fail to get a majority. This in turn implies that the parties of the left have a majority in a five-party parliament. The latter is only a hypothetical majority because the SPD has ruled out a coalition with the Left party – for now. But the Social Democrats could change tack during the parliamentary term. So, Ms Merkel would have a partner who could bail out at any time to form a three-way coalition of the left, or a two-party minority government with the Greens, tacitly supported by the Left party. The latter has been tried at regional level, where it has been a great success for the SPD. The temptation for the party to end Ms Merkel’s reign at some point in the next four years will be hard to resist.
Because the SPD has promised not to enter a coalition that includes the smallest left-leaning party, Munchau says a coalition of the left wouldn’t form right away.
Which makes for a worse scenario… instability:
This leaves as the two most probable scenarios either an unstable government of the centre-right, which has no majority in the upper house, or an unstable grand coalition, which could fall apart at any moment. Neither might survive a full term.
Munchau also thinks a continuation of the CDU-FDP coalition in the Bundestag may not be much more stable:
It is hard to see how the present coalition could govern, especially as I would expect that should the SPD remain in opposition they would be much less supportive of Ms Merkel’s eurozone policies than they were in the outgoing legislature.
White is less worried, saying Germany’s political system is better placed than that of other countries to handle this “50-50 divide” among voters leaning left and right.
Then there’s the question of how Angela Merkel herself might lead, whatever government does form.
Gavyn Davies says that despite Merkel’s conviction that the solution for Europe’s troubled economies is to “commit to becoming German clones, bound by firm legal agreements”, she does have an exception for the ECB, highlighted by her crucial decision to support Mario Draghi rather than Jens Weidmann in August last year.