German Election Update
Last month’s post on the German Election showed that Social Media Influence (SMI) was pointing to the FDP outperforming their rather meager poll and betting market figures. The implication was that Germany would shift to the right with FDP likely entering into a ruling coalition with Merkel’s CDU/CSU. At the time of forecasting, there was no known similar forecast as FDP had not met the minimum 5% in the previous election and mainstream expectations were that it would not perform well in the 2017 election.
Polls and betting markets have changed little in the last month. On May 23rd, the probability of Merkel becoming the next Chancellor was 85% whereas on June 23rd it was 86%, according to PredictIt. Lindner, the leader of the FDP, has remained at a 1% chance. In general, the betting markets have not changed much. Similarly, the polls have remained fairly stable as well with swings of around 2 percentage points for the main parties.
Social Media Influence (SMI) continues to show outsized influence for the FDP. Though generally polling in the high single digits and having terrible betting market odds, its SMI shows a tie with Merkel’s CDU/CSU. In terms of SMI, the biggest positive mover over the last month has been the CDU/CSU. In general, left-leaning parties have suffered the most. Germany’s left-leaning parties have been losing SMI and right-leaning parties gaining, which reinforces the forecast of German moving towards the right of the political spectrum.
One of the largest changes in June has been the shifting political coverage which has begun to more seriously consider FDP. In fact, major publications have very recently begun to speculate along the lines of SMI forecasts in that they are now openly talking about the FDP outperforming and entering into the ruling coaltion.
Bloomberg: How Do You Say ‘Macron’ in German?, 6/22/17
“Most assume that voters will give German Chancellor Angela Merkel another mandate in the September elections. The big question is which party she will govern with this time.
The Free Democratic Party, which is both economically and socially liberal, is back after a four-year hiatus and hoping to claim its traditional kingmaker role. FDP leader Christian Lindner casts himself as a sort of German Emmanuel Macron. “In France, a good-looking, eloquent, reform-friendly 39-year-old has won,” Lindner likes to say on the campaign trail. “I’m 38,” he added for extra effect in a June 20 speech during German Industry Day in Berlin.”
This article from Bloomberg is very positive on the FDP and its leader, Lindner. It is one of the first financially oriented publications to highlight the possibility of the FDP entering a ruling coalition with Merkel’s party.
Politico: German liberal chief targets conventional wisdom, 6/21/17
“Following a string of strong showings in regional elections, the FDP has polled well at the national level, reaching a high of 10.5 percent in a survey published Tuesday by the respected Allensbach Institute. If the polls are borne out at the ballot box in September, the FDP would be in good position to join a government led by Angela Merkel’s conservatives.”
Here is Politico speculating along the same lines as Bloomberg. Basically, this article states that FDP is starting to look like a potential partner for the historically dominant CSU/CSU.
Der Spiegel: Christian Lindner and black-yellow power factor FDP (translated from German to English), 6/21/17
“The liberals are in demand, as a power factor, as a government partner. Will there be more? What seemed inconceivable four years ago could occur after the Bundestag elections in September – a renaissance of the black-yellow coalition.”
Der Spiegel, like other major publications, has begun to speculate on a CDU-FDP or black-yellow ruling coalition after the upcoming elections.
The Economist: The Free Democrats and Greens weigh the risks of a coalition with Angela Merkel, 6/27/17
“Such a tripartite government, named after the black (Union), green (Green), and yellow (FDP) colours of that country’s flag, has just been formed in Schleswig-Holstein. The three are on track to win a Bundestag majority in September, thanks to the declining fortunes of the Social Democrats (SPD).”
The Economist is speculating on a CDU/CSU and FDP coalition with the addition of the Green Party. The main thrust of the article is about the FDP and its rising prospects, however, and is very positive on Lindner.
So, in the last few weeks, there has been an explosion of mainstream speculation regarding FDP and its return to a ruling coaltion. There has also been a signficant increase in covereage of Lindner by mainstream analysts and publications.
It is important to note that SMI highlighted the strong underlying support enjoyed by FDP well before the possibility of it outperforming hit the mainstream. Further, note that these publications are starting to speculate on FDP entering a ruling coalition, whereas SMI actual forecast FDP entering the ruling coalition based on data. There is a large difference between generally speculating on a potential outcome and forecasting that outcome based on data.
Looking forward, we expect FDP to continue to gain traction. Right-leaning parties such as the leading CDU/CSU should continue with a strong position whereas the AfD, or the furthest right party, could gain some limited traction. Left-leaning parties (SPD, Left and Greens) all look to decline slightly.
There are still three months until the German Election and plenty can happen in that time. We’ll continue to follow the SMI closely while comparing it to polls, betting markets, financial markets, and news coverage.