Chancellor Angela Merkel gestures as she sits down in the office in Berlin for the weekly cabinet meeting on April 13, 2021.
JOHN MACDOUGALL | AFP | Getty Images
LONDON – It was never easy to find a successor for Angela Merkel, who has been German Chancellor for 16 years. However, the race has just gotten more complicated. Two rivals are contesting the conservative ticket.
The obviously conservative candidate in the upcoming German elections would be Armin Laschet, head of the state of North Rhine-Westphalia. He was elected chairman of the CDU party by Merkel in January and claims he wants to modernize Germany.
Until Markus Soeder from the Bavarian sister party CSU threw his hat into the ring. Soeder is probably the most popular man in German politics.
“It has always been clear that the race to succeed Angela Merkel will be long and not straightforward. It may not be a blockbuster film, but a political series that is worth watching,” said Carsten Brzeski, chief economist at ING Germany, said in a note on Tuesday.
Party Chairman or Mr. Popularity
In Bundestag elections, the CDU and CSU act together – and thus only nominate one candidate.
The CDU legislature will discuss who this should be on Tuesday and hope to be able to make a decision this week. But it will be a difficult choice between your party leader and someone as popular as Soeder.
Elisabeth Motschmann, a CDU legislator, told CNBC’s Squawk Box Europe on Tuesday that she supports Soeder.
“For this very tough job, I think that Markus Soeder will give his best and can win,” she said. “I don’t think (Laschet) would be difficult enough and he can’t make decisions like Soeder.”
Jens Suedekum, professor at the Düsseldorf Institute for Competition Economics, told CNBC via email: “What distinguishes Soeder is its unique degree of flexibility. You can call it opportunism when it comes to political principles.”
The party chairman of the Christian-Democratic Union (CDU), Armin Laschet (L) and the Bavarian Prime Minister and the chairman of the Christian-Social Union (CSU), Markus Soeder.
Pool | Getty Images News | Getty Images
The Conservative Party’s popularity in Germany has declined since January when the coronavirus pandemic began to worsen in the country.
It should finally harmonize the blocking rules in order to contain a third wave of cases. This came after the population expressed their frustration at how different the rules have been from region to region since the first Covid-19 outbreak.
But things could get better for the Conservatives soon.
“As soon as the official election campaign of the CDU / CSU begins in full and the vaccinations start, things will look better for them,” said Naz Masraff, director of the consulting firm Eurasia Group, in a note on Tuesday.
However, she stressed that Laschet would probably find it more difficult to consolidate the electoral base of the CDU / CSU and win back centrist voters from the Greens.
“He will also have to work hard to change his image as a weak and ambiguous leader who has not taken as much action against the pandemic or against corruption in the ranks of the party as many Germans expected,” added Masraff.
Whoever chooses the CDU as its running candidate could ultimately have an impact on what kind of coalition will emerge in September.
“Laschet’s candidacy would benefit the Greens and the Social Democrats. It would also increase the chances of a Green Chancellor after the September elections,” said Masraff.
The CDU / CSU is currently at the top of the polls with around 27% of the votes. However, the Greens are gaining ground with around 21%. The party with the most votes will lead the coalition negotiations after the September elections.
What it means for markets
Christian Schulz, chief economist at Citi, told CNBC’s Squawk Box Europe on Tuesday that investors will examine what the new administration could mean for euro area fiscal policy in light of the upcoming elections in September.
He said that both conservative candidates “say very little about what they want to do,” but added: “Soeder has more eurosceptic instincts so it would likely be the worst result for the markets, at least in the short term.”
The yield on the 10-year German bond has risen since Soeder’s announcement on Sunday, suggesting some concerns about political uncertainty.