This might be getting a bit old by now (we have short FX attention spans)
But ... here is Barclays on German politics:
We believe that there are four possible options.
- Given the progress made in the Jamaica coalition talks, the Greens could form a minority government with the CDU, which would be unprecedented in post WWII German political history. This would require the support of other parties in the Bundestag on key votes, and hence make the approval of significant reforms, including on the euro area, difficult.
- There is also a chance that the FDP returns to the coalition talks in a few days time.
- Martin Schulz, leader of the SDP, the second largest party following the recent election, has stated already that he interpreted the election outcome as a vote against the Grand coalition and will hence not be participating in coalition talks to form a 'Grand Coalition' government.
- The last option would be new election, although the latest poll (Politbarometer, 17 November) indicates that the outcome would not be very much different from September's election results.
Angela Merkel will meet the German President, Frank-Walter Steinmeier, to discuss the possible options. Last weekend, he stated that he would prefer to avoid new elections. Given his SPD affiliation, he could try to convince the party to form a 'Grand Coalition' with the CDU for the good of the nation. A number of key issues, including the eurozone and immigration reform will require a majority in the Bundestag in the next election cycle. Therefore, we believe that any CDU-led government is less likely, while new elections and a 'Grand Coalition' seem more likely.
