Intel stock extends gains after report of possible U.S. government stake
Investing.com -- Provisional results confirmed that Friedrich Merz’s mainstream conservative bloc secured victory in Germany’s national election, while the far-right Alternative for Germany (AfD) surged to become the second-largest party.
The campaign was shaped by economic stagnation in Europe’s largest economy and growing concerns over migration. Merz, who took a hardline stance on immigration in the final weeks, capitalized on voter frustration. The election also unfolded amid uncertainty over Ukraine’s future and Europe’s relationship with the United States.
According to official results, Merz’s Christian Democrats (CDU/CSU) and the center-left Social Democrats (SPD) won a combined majority in the Bundestag after smaller parties failed to meet the electoral threshold. This positions Merz as the frontrunner to become Germany’s next chancellor. On election night, he stated his goal of forming a government by aster.
The Greens and the left-wing Linke have also entered parliament.
“A two-party coalition between CDU/CSU and SPD is now the most likely outcome,” Deutsche Bank (ETR:DBKGn) analysts said in a note.
“The prospect of a two-party coalition led by a strong CDU/CSU will likely be seen as a positive by Germany’s corporate sector, promising less policy gridlock and uncertainty than under the outgoing government,” they added.
Merz has ruled out any coalition with AfD, which recorded its strongest-ever performance. Meanwhile, Chancellor Olaf Scholz’s SPD suffered a significant defeat but will remain in office until a new government is formed.
The conservatives secured 208 seats in the 630-member Bundestag, while AfD won 152. The former governing coalition lost ground, with the SPD falling to 120 seats and the Greens to 85. The Free Democrats (FDP), which triggered the early election by exiting the coalition, failed to cross the 5% vote threshold required for representation.
The Left (Die Linke) party won 64 seats, while the newly formed Sahra Wagenknecht Alliance narrowly missed the 5% cutoff.
The AfD and the Linke reached 216 seats combined in parliament, which Goldman Sachs analysts warned may form “a potential constitutional blocking minority against a reform of the debt brake or an off-budget defense fund that requires a 2/3 constitutional majority.”
“The election result thus complicates fiscal reform,” they added.
That said, the analysts note that Germany has several options to expand fiscal support, though implementation may take time. One approach is using joint European funding for military spending, which would bypass debt-brake restrictions.
Other possibilities include reforming the debt brake with left-wing support in exchange for increased investment or invoking its escape clause in response to an external shock, though the latter risks being overturned by the constitutional court if used repeatedly.