Would a Schroeder defeat mean that it’s all change in Europe?

If the polls and the betting markets have the German election right then Angela Merkel’s grouping of Christian Democrats and its Bavarian-based associate party Christian Social Union are on their way to a victory in the national ballot which is now set to take place on September 18th.

The “starting gun” was fired on Thursday when the German President, Horst Koehler, announced that he had agreed to Chancellor Schroeder’s request to bring forward the country’s national election by a year. The early election has been on the cards since May when Schroeder’s ruling Social Democrats were badly beaten in state elections in the party’s traditional heartland of North Rhine-Westphalia.

The latest polls give Merkel’s CDU-CSU grouping 43% with 7% being recorded by the Free Democrats – the likely coalition partner. Shroeder’s SDP is on 26%. The best UK betting price on the CDU-CSU is currently 1/20 – but note that in this market “the winner will be the group that wins the most seats in the Bundestag.” As we get closer to September 18th we expect other markets to emerge.

A key issue is economic reform and dealing with the country’s soaring unemployment figures currently at 4.7m.

With Europe going through a period of uncertainty following the no votes in the French and Dutch referenda a change in Berlin could have a huge impact on the future direction of the EU. In some quarters Merkel is seen as being an anti-European and clearly she would not have the same close relationship with Jacques Chircac that has been enjoyed by Schroeder. The move would also come at a time when the UK holds the EU presidency and it will be interesting to watch how UK ministers and Tony Blair deal with a changeover in the country with Europe’s biggest economy.

Mike Smithson