Chastened Merkel braces for coalition tussle after vote

BERLIN (Reuters) – Germany’s Angela Merkel turns to the task of sounding out partners to build a coalition government after securing a fourth term as chancellor in Sunday’s election, although she has been weakened by a surge in support for the far right.

Damaged by her decision two years ago to allow 1 million migrants into Germany, Merkel’s conservative bloc took 33 percent of the vote, down 8.5 points from the 2013 election and hitting its lowest level since 1949.

The country’s establishment was shocked as voters flocked to the anti-immigration Alternative for Germany (AfD), which scored 12.6 percent. It was the first time a far-right party will enter the German parliament in more than half a century.

However, Merkel’s party is still the biggest parliamentary bloc and Europe’s most powerful leader said her conservatives would set about building the next government. She said she was sure a coalition would be agreed by Christmas.

“There cannot be a coalition government built against us,” she said.

Investors were unsettled by the prospect of a weaker Merkel at the head of a potentially unstable coalition with the pro-business Free Democrats (FDP) and Greens.

“The weak result could make Angela Merkel a lame duck much faster than international observers and financial markets think,” ING economist Carsten Brzeski said.

The euro EUR=D4 slipped in early trading on Monday while German stocks also opened slightly weaker, down 0.2 percent at the open. German debt gained as demand for safe-haven assets rose in the wake of the vote.

“Earthquake, warning, landslide, shock. This election can only be described with such drastic vocabulary. It was an anti-Merkel election which ended as a pro-Merkel election,” said Germany’s Handelsblatt business daily.

Many Germans were alarmed by the rise of a party likened by the foreign minister to Nazis. Protesters threw stones and bottles at police outside the AfD’s campaign party in Berlin on Sunday evening.

Christian Democratic Union CDU party leader and German Chancellor Angela Merkel arrives for a news conference at the CDU party headquarters, the day after the general election (Bundestagswahl) in Berlin, Germany September 25, 2017. REUTERS/Kai Pfaffenbach

“The AfD in the German Bundestag (parliament) is damaging our country,” employers’ association BDA leader Ingo Kramer said. “The other parties now have the task of cornering the AfD in direct parliamentary debate.”

HOUNDING MERKEL

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