The final countdown has started. Four more days and the time has come. Another make-it-or-break-it election on May 26. The fate of the German coalition depends on it. The fate of Europe, too. No, we're not talking about the European elections but state elections in Bremen.
The final countdown
Bremen? What is all this about, you might ask. Bremen is the smallest state in Germany and one of the poorest, with the highest unemployment rate. A port city with a long and proud history, in which the Social Democrats, the SPD, have ruled in various coalitions almost continuously. And now, the red fortress is about to fall for the first time since World War II. Why should anyone outside of Bremen care? Because if the SPD suffers another severe defeat, it could have consequences in Berlin.
Tight race
In Bremen, the mayor election is a neck-and-neck race between the SPD and the CDU, with the very latest opinion polls seeing a lead for the CDU. If Bremen changes its political colour, there is a high risk that the SPD will withdraw from the federal government. Remember, the SPD only very hesitantly joined the federal government last year and has pledged a mid-term review of the government’s work after the summer. An upset in Bremen, combined with a potential loss in the European elections, would embolden those in the party who have argued against joining the government.
Symbolic loss
Losing Bremen would be more symbolic than losing in the European elections. But add to this the frequent speculation in the German media about Chancellor Angela Merkel stepping down before the 2021 elections to pave the way for a successor, and the ingredients for a stormy political summer in Germany are all in place. Obviously, neither a weakened CDU nor a defeated SPD have an interest in imminent snap elections, fearing further electoral losses. At the same time, pulling the plug on the government- either for the SPD to go into opposition or for the CDU to reposition itself and prepare Merkel's successor- should not be excluded.
When watching election results on Sunday, don't just focus on the European elections, keep a close eye on Bremen, too. The noise that these state elections produce could make their famous town musicians proud.
Disclaimer: This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more.