UBS: German election watch - Schulz to run against Merkel

Our view

The next German Bundestag elections are due in autumn on 24 September.We expect the CDU to receive the most number of seats and be joined bythe SPD or the Green party in a coalition (see Figs. 1 and 2). CDU headAngela Merkel has stated that she will run for a fourth term as chancellor.However, Sigmar Gabriel's announcement that he supports Schulz as theSPD candidate for chancellor could improve the party's electoral fortunes.Indeed, Schulz is faring much better than Gabriel against Merkel in currentfederal election polls (see Fig. 4).

In any event, an SPD-led coalition with the Left ("Linke") and the Greenparty remains unlikely; the polls project that it will not gain a parliamentarymajority. It also remains to be seen whether these parties are willing tocooperate, though we consider such collaboration likelier now than in thepast, when SPD officials ruled out a coalition with the Left. However, thefate of the FDP could change the odds of this coalition. If the liberals fail toachieve the 5% threshold needed to reenter the Bundestag, their votes willbe distributed proportionally, increasing the share of seats the remainingparties receive. This would raise the number of seats going to the CDU,SPD, and the Left, opening up the specter of a potential SPD-led majority.

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