Rarely have German elections received as much international attention as the general elections held there on Sunday. Especially in Europe, still mired in economic crisis, all eyes were on the continent's economic powerhouse.
To many observers, it seemed that any major decisions regarding the European economic crisis would have to wait until after Germany's votes were counted. And now that the results are in, those hoping for a notably different approach from Berlin are likely to be disappointed. While sweeping policy changes were never on the table to begin with, the election could still have long-term impacts on Europe's future.
Although there were some surprises on election night, one outcome – arguably the most important one - seemed settled before any ballots had been cast: incumbent chancellor, Angela Merkel, would remain in office. And so it was merely the size of her victory, as her conservative Christian Democratic Union (CDU) achieved its best result in more than 20 years, that came as a surprise to some.
But Merkel's triumph, based largely on her immense personal popularity, disguised the fact that her government coalition, consisting of her party and the smaller Free Democratic Party (FDP), lost its majority and on aggregate received fewer votes than four years ago. Indeed, losses for the FDP were so dramatic that the party for the first time in its history failed to reach the 5 percent threshold mandated by the constitution to enter parliament.
The chancellor thus won the elections but lost her government. For her third term, Merkel will consequently have to form a new coalition for the third time. For this, the chancellor is likely to reach out to the center-left Social Democratic Party (SPD) in order to set up another "grand coalition" between the two biggest parties.
Over the past years, the Social Democrats repeatedly lent crucial support to Merkel when they supported bailouts and other measures in parliament, despite being in the opposition. And although there may be ideological differences between the parties regarding some of these policies, Merkel's personal electoral triumph serves as a stark reminder that her cautious step-by-step approach to the crisis remains popular.
In addition, the surprisingly strong showing of the new anti-euro party "Alternative for Germany," which almost reached the 5 percent mark, signals a strong skepticism in parts of the population towards ever closer European integration. Even though this newcomer did not make it into parliament, Germany's top politicians have surely taken note of its potential.
These are not encouraging signs for those hoping for a different approach and more strategic leadership from Berlin. Potential policy changes are now likely to be gradual. Still, the changed constellation of a new coalition would not be without consequences. Social Democrats are anything but excited about the prospect of entering a coalition with Merkel again. At the end of their last cooperation in 2009, the SPD recorded its worst ever election result, a trauma the party still remembers all too well.
If the Social Democrats can be convinced to enter another government under chancellor Merkel at all, the party is likely to demand significant concessions. These would likely focus on domestic policies, but could still impact the situation in Europe in the long run.
The SPD could, for example, demand the introduction of a general federal minimum wage, thereby fulfilling one of its main campaign promises. Despite functioning purely as a domestic topic during the campaign, such a policy, depending on the details, could have ramifications for Europe, as it would increase domestic demand in Germany, thereby supporting struggling economies in southern Europe. Furthermore, the Social Democrats would likely insist on filling key cabinet positions, including potentially the finance ministry.
At the moment, the European crisis seems under control and financial markets are relatively calm, as the European Central Bank has increased its role in the crisis's management. Yet many questions about the future institutional shape of the European Union remain unanswered and parts of the continent remain stuck in recession. But given the chancellor's strengthened position, Germany's approach to the euro crisis is unlikely to change in the immediate future.