Merkel vows to keep up reform pressure on Greece after historic election win

Angela Merkel has said she will keep up the pressure on Greece to carry out reforms after scoring a historic victory in the German federal elections on Sunday.

“We should not stop exercising pressure for the agreed reforms to be carried out,” said Merkel after a major election win for her CDU party and its Bavarian partner, the CSU.

Merkel also insisted that she told the truth about Greece’s predicament and the possible need for a third bailout, which was brought up during the election campaign by Finance Minister Wolfgang Schaeuble.

“This is not a new issue and we raised it repeatedly during the election campaign,” said Merkel, adding that Schaeuble had first raised the matter before a parliamentary committee in November 2012.

Merkel won an overwhelming endorsement from German voters, putting the country’s first female chancellor on course for the biggest election tally since Helmut Kohl’s post-reunification victory of 1990.

Merkel’s Christian Democratic bloc took 41.5 percent to 25.7 percent for the Social Democrats of Peer Steinbrueck in yesterday’s election, according to results from all 299 districts. That leaves her short of a majority and needing a coalition partner to govern Europe’s biggest economy.

“This is a super result,” Merkel, who is now set to become the fourth chancellor since the war to win a third term, told supporters at her party’s headquarters in Berlin. “To the voters, I promise that we will handle it responsibly and with care. We will do everything we can in the next four years to ensure that they’re once again successful years for Germany.”

After sweeping the election on the back of an unemployment rate near the lowest in two decades and her handling of the euro-area crisis, Merkel, 59, must now look for a governing ally after the Free Democrats, crashed out of the lower house of parliament. Party leaders are due to meet today to discuss coalition talks.

During the campaign, Merkel said that insisting on reforms in euro countries that received aid was the only way to raise Europe’s competitiveness, citing the fall in German joblessness from a post-World War II high of 12.1 percent in 2005 following a labor-market overhaul. The German unemployment rate is now 6.8 percent compared to 12.1 in the 17-nation euro region. German 10-year bond yields are 1.94 percent, while comparable U.K. gilts yield 2.92 percent and U.S. debt 2.73 percent.

Merkel’s victory gives her another four years at the helm. If she serves the whole term as she said she intends, she will have spent 12 years as German leader, more than the 11 1/2 years managed by British Prime Minister Margaret Thatcher.

To get there, she must first find a governing partner. Merkel’s choice is limited to a re-run of her first-term “grand coalition” with her traditional SPD rivals or the first-ever national alliance with the Greens. Neither party rushed to endorse a coalition. Steinbrueck, her former finance minister, reiterated that he won’t serve under the chancellor, saying “the ball is in Mrs. Merkel’s court.”

The FDP took 4.8 percent, below the 5 percent hurdle needed to win seats in the Bundestag for the first time since the first elections of the postwar period in 1949.

The Greens, with which the SPD governed from 1998 to 2005, took 8.4 percent, and the anti-capitalist Left Party got 8.6 percent. The anti-euro Alternative for Germany had 4.7 percent.

Merkel’s score compared to Kohl’s 43.8 percent in December 1990, two months after reunification of East and West Germany. She’s now set to follow Adenauer, Kohl and Helmut Schmidt as a three-term leader.

While Merkel said that “it’s too early to say precisely how we proceed” with coalition building, she will probably be forced into a coalition with her Social Democratic or Green party rivals to ensure a stable government. Coalitions are the rule in the German political system and negotiations usually last from four to six weeks.

“It’s up to her to work for a majority,” said Steinbrueck.

Not many in the SPD are pushing for a repeat of the grand coalition, said Frank-Walter Steinmeier, the former foreign minister who now leads his party’s caucus in the Bundestag. He said he’d rather stay in his current role.

As a junior partner, the party would effectively be putting its fate in her hands. Their partnerhip with Merkel ended with the SPD’s worst postwar result, 23 percent, a tally many in the party blame on the grand coalition and an inability to win credit for policies in a Merkel government.

Merkel was first elected in 2005, yet it was the euro-area debt crisis spreading from Greece from 2009 that dominated her second term and may dictate her political legacy.

As Germany became the biggest contributor to 496 billion euros of rescue aid, with the German chancellor insisting in return on reforms to make Europe more competitive, the continent was divided into a rich north and weaker south. That made Merkel resented in countries such as Greece and Portugal; in Germany it created an opening for the AfD, which was founded earlier this year, to vie for its first parliamentary seats.

Market reaction was muted as investors were reluctant to put on big positions before preliminary euro zone manufacturing data due at 0758 GMT.

Investors were keen to see the shape of the new government in euro zone paymaster Germany. Merkel won a landslide personal victory on Sunday although her conservatives appeared just short of the votes needed to rule on their own.

Merkel’s party may have to convince leftist rivals to join a coalition after their current allies, the Free Democrats (FDP) suffered a humiliating exit from parliament.

“It’s somewhat positive for peripheral markets which have done quite well in recent days but we don’t expect big moves as this was expected,» said KBC strategist Piet Lammens.

“It might start to get things moving again in Europe… Maybe we can get some breakthroughs on the banking union or another aid package for Greece.”

[Kathimerini English Edition & agencies]