Mish's Global Economic Trend Analysis

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May Be a "Grand Coalition" Nightmare After All Posted: 22 Sep 2013 03:44 PM PDT As votes near final counting, CDU/CSU may be 1-3 seats short of an out majority. The projections posted earlier may be incorrect. For example Haartez and PressTV had stories proclaiming an outright majority for CDU/CSU. From Haartez German Chancellor Angela Merkel's conservatives are on course to win a historic absolute majority in Sunday's election, according to a projection based on exit polls and some results from broadcaster ARD. The projection put Merkel's conservatives on 42.5 percent, a whisker over the combined total for the left parties who together scored 41.6 percent Even though it's a big win for Merkel, the Financial Times speaks of a "Grand Coalition Nightmare", noting  Coalition uncertainty hangs over Angela Merkel victory. Even if Germany's knife-edge general election ultimately produces a grand coalition, the result is still a big personal triumph for Angela Merkel. A minority government – or one with a narrow majority – for Ms Merkel would be very difficult to manage, and the chancellor is more likely to prefer a coalition. The most popular in Germany – backed by some 52 per cent of voters – would be a grand coalition. But that could still be very difficult to negotiate. On television on Sunday night, Ms Merkel insisted that she would not answer "speculation" over the shape of the next government until the final result was clear. "We will discuss this in our party circles," she said. "Tomorrow we will have another look. It will not depend on us alone." Inside the SPD, many members regard a grand coalition as a nightmare. Mr Gabriel has summoned a party convention for next Friday to consider how the SPD should proceed. Leftwingers want to call an all-party referendum on any proposal for a grand coalition. That could prove a severe obstacle. If Ms Merkel is just one or two seats short of an absolute majority – something that was still unclear on Sunday night – she might be more tempted to approach the Greens, whose Jürgen Trittin, co-leader of the campaign, has never entirely ruled out such a "black-green" combination. He is known to be keen to become finance minister, but many grassroots members of his party are horrified at the idea of co-operating with the conservatives, and especially with the Bavarian CSU. One possibility is that Ms Merkel would approach the SPD for a grand coalition, and initially be rejected. She would then try the other possibilities of an alliance with the Greens, or forming a minority government, before eventually returning to the SPD with a more persuasive offer. Whatever happens, the negotiations could take many weeks. The longest negotiations ever were in 1976, when Helmut Schmidt, the SPD chancellor, took 73 days to reach agreement with Hans-Dietrich Genscher of the FDP. The last grand coalition talks, in 2005, took a more modest 65 days. The average time is 37 days. The latest projection tally I now have suggests CDU will be 1-3 seats short. This is going down to the wire. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com  Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

FDP Out; Possible CDU Outright Majority; No Grand Coalition Posted: 22 Sep 2013 10:37 AM PDT Shortly after posting "Too Close to Call", reader Bernd pinged me with an update. "Polling agency ZDF predicts CDU/CSU has an absolute majority of 304 seats in Parliament." Bernd also added ... Hello Mish We are unlikely to know until very late tonight or tomorrow, if AfD made it. I will keep you posted. This has to do with a lot of technical/statistical problems and with the number of "voters by mail". This was the highest number of "mail voters" ever. Mail voters are people who voted beforehand by mail as per request. The clear winner, undoubtedly, is Angela Merkel. 42+% is impressive. Bernd Those who assumed a Grand Coalition was inevitable were simply wrong. It could still happen, but I doubt it. Why enter a coalition if you do not need to? Addendum: If AfD does squeak in, the absolute majority for CDU-CSU goes away. In that case, Merkel would have to choose between a coalition with AfD that would be relatively stable, or a coalition with SPD that would not be stable because of demands on minimum wages, banking unions, tax hikes, etc.  Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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