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Trying times ahead for Germany

Germany has elected the members of the new parliament. The result is a political shockwave.

A political shockwave has rocked Germany's foundation. With the mainstream parties CDU/CSU and SPD incurring landslide losses and the populist AfD and liberal FDP set to enter the Bundestag, smaller parties will, for the first time in post-war history, be a major political force in the German parliament. While Angela Merkel is likely to remain chancellor, her position has been gravely weakened.

Forming a new government will not be easy given the incumbents' weakness and the other parties' strengths. This will take some creative finesse on Merkel's part, so winter may arrive before Germany's new government is in place. The Greens' success is nothing short of astonishing. Although the party had not expected to fare so well, it will seize this opportunity to ratchet up the pressure.

The power and automotive industries are likely to feel the squeeze of more rigorous environmental policies. The liberals' return is sure to inspire hopes of business-friendlier policies among entrepreneurs. It is as yet unclear what, exactly, this will entail. The FDP will be reluctant to welcome French President Macron’s wishes for German financial support (Eurobonds).

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