Merkel In the Driver's Seat

A resounding election victory makes German Chancellor Angela Merkel the most dominant political force in Europe.

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German Chancellor and chairwoman of the Christian Democratic party, CDU, Angela Merkel, gestures during a news conference after a party's board meeting in Berlin, Monday, Sept. 23, 2013. German Chancellor Angela Merkel may have won an impressive third general election but she faces a delicate and lengthy task in forming a new government as party leaders met Monday to map out their next steps. Merkel's Union bloc achieved its best result in 23 years Sunday to put her on course for a third term, winning 41.5 percent of the vote and finishing only five seats short of an absolute majority in the lower house.

Chancellor Angela Merkel's victory was not a surprise, but we most certainly had other surprises in Germany's general elections this past Sunday. Merkel's conservative party (CDU) won 41.5 percent of the vote, which was just shy of a clear majority but a "super result" nonetheless, as Merkel stated. This is a ringing endorsement for her leadership, which is now going into her third term. This is the best election showing for the CDU since 1994.

Sunday's election, however, because a "super disaster" for the CDU's junior liberal coalition partner, the Free Democrats (FDP), which failed to get even one seat in this election. The major opposition to CDU, the center-left social Democrats SPD, received 25.7 percent of the vote. The Green Party took 8.4 percent of the votes, while the former communist Left Party (Die Linke) received 8.6 percent.

[See a collection of political cartoons on the European debt crisis.]

CDU's Angela Merkel only has a few choices. The most obvious is to form a grand coalition with SPD. The less likely choice would be to form a coalition with the Green Party, but they are miles apart on certain issues. A grand coalition of CDU–SPD has been done before, from 2005 to 2009. The SPD did not enjoy that experience, and many political pundits blame the SPD's 2009 election debacle on it agreeing to join the CDU in a grand coalition.

While it is conceivable that the three left-of-center parties (SPD, Green and Left) could form a coalition and obtain a majority, this is highly unlikely. The Left Party is simply too radical for the SPD and Green parties.

The election was the easy part for Angela Merkel. She now has to form a coalition. The backroom bargaining in Europe's largest economy has begun. Any coalition with SPD would involve a call for relaxing austerity measures for other Eurozone members, and possible increases in German worker protection. Most German watchers do not foresee any major policy changes from the recent past in this grand coalition other than the softening of austerity measures in the Eurozone.

[Read the U.S. News Debate: Is Europe Right to Abandon Austerity?]

The SPD is seen as more vulnerable because, if it drags its feet on creating a grand coalition, it might garner more criticism. The SPD party has significantly weakened over the decades. Of course, Merkel can simply call for a new election. Other parties would be extremely nervous at this prospect because the outcome would be uncertain for them.

One thing is certain, though: Angela Merkel is the dominant Eurozone leader. The euro project is safe as Merkel's commitment to it is unshakable. She is considered to have the "safest pair of hands … during a difficult time for the Eurozone".

Besides building a coalition, Merkel does have some real underlying economic issues ahead of her. Germany has not been immune to the widening of the income gap that is plaguing most western economies. Other issues include what to do with the U.S. spying on Europeans and whether German society's vulnerable individuals are being looked after in a fair, cushioned European social-welfare manner. Also, she must figure out how to manage the aging infrastructure and population in her country.

These are issues all European countries are facing. Germany's strong economic performance, however, amid a struggling euro zone is unquestionable.

The next move is Merkel's. There's no doubt that she is in the driver's seat, not only for Germany but also for the Eurozone.

Scheherazade Rehman is a professor of international finance/business and international affairs at the George Washington University. You can visit her homepage here and follow her on Twitter @Prof_Rehman.

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