Merkel heavy favourite to retain position as Chancellor
German Chancellor Angela Merkel was the heavy favourite to retain her position against Martin Schulz before the Bundestag election on 24 September.
Polling showed that Merkel's Christian Democratic Union (CDU) party and its Bavarian ally, the Christian Social Union (CSU) would remain the largest party as a result of the Sunday election, but would likely fall just shy of a majority.
As it had been common occurrence in German politics for the winning party to be unable to form a majority, attention turned towards the smaller parties and what potential coalitions the CDU could form in order to make up the required majority.
POTENTIAL COALITIONS
The Social Democratic Party (SDP) had previously formed a union with the CDU on two occasions, including Merkel's first term, in what was called the "Grand Coalition".
As polls suggested that Germans were mostly satisfied with their government, a potential third coalition in just four elections could be on the horizon.
However, a so-called "Black-Yellow" coalition between the CDU and the smaller Free Democratic Party (FDP) was also seen as a possibility, as it would likely take Merkel over her target required for a majority. The FDP was also the only party besides the SDP that the CDU had previously formed a union with.
Polling suggested that it was highly unlikely that Merkel would not be re-elected as chancellor as her closest rival, Martin Schulz of the SDP, was projected to pick up about 22% of the vote against the CDU's 36%.
The anti-immigration, anti-Euro Alternative for Germany (AfD) was expected to collect about 11% of votes, and the leftist Die Linke and Greens parties were forecast to pull in 10% and 8%, respectively.
Initial projections will be broadcast on German networks Das Erste and ZDF on Sunday evening, with the final result to come sometime before Tuesday.
POTENTIAL STOCK MARKET EFFECTS
Germany's flagship DAX 30 index, made up of the 30 largest domestic companies on the Frankfurt Stock Exchange, had posted an average 0.94% drop in the two trading sessions that followed an election.
Britain's FTSE 100, France's CAC 40 and Amsterdam's AEX had historically seen drops after German elections too, posting negative trades after every German election since the fall of the Berlin Wall.
The Euro was projected to lose some of the 13% in gains it had made in 2017, as it had slipped 0.27% on average after a reshuffle at the Bundestag.
Analysts at ING said, "judging from the parties' statements and economic plans, no matter what the next German government looks like, expect some fiscal stimulus, some economic redistribution and somewhat more tolerance for higher wages," with the effect of these on the Eurozone as a hole to be the only thing that would change dependent on the chosen party.
Researchers at Berenberg said reforms to the European Monetary Fund, along with an increased budget for common projects were also quite likely.