Commerzbank's Chief Economist, Dr Joerg.....>

GERMANY: Commerzbank's Chief Economist, Dr Joerg Kraemer says that Angela Merkel

will return to the Chancellery. The bigger question is whether it's in coalition

with the Social Democrats (SPD), or Liberals (FDP).

- The election "will also determine how far Merkel can go in backing French

President Emmanuel Macron's plan to create a euro-zone budget."

- Because CDU/CSU and the FDP have failed to poll more than 50% of votes in

weekly polls, Kraemer says that the three parties need to pick up more support

to achieve a stable government. If they do not, then the CDU/CSU might need to

enter a Grand coalition with the SDP or instead ally with the Liberals.

- The Liberal FDP is seen as favourable for business aiding labour flexibility

and corporate competitiveness. However, Commerzbank point out "Germany under a

renewed grand coalition would be more likely to endorse greater redistribution

within the euro zone. This is all the more true since the SPD in its election

manifesto calls on Germany for more financial support to Europe".

- Instead a coalition with the FDP could cause Germany to step back as the FDP

is calling for a downsizing of the ESM rescue fund.