Political earthquake hits Germany

Key Markets report for Tuesday, 6 May 2025

A political earthquake shook Germany this morning as the Chancellor elect Friedrich Merz failed to win the parliamentary vote to become the new Chancellor. He needed 316 deputies to vote for him, but only 310 did, suggesting that he failed to obtain support from some of his own coalition’s and/or even his own party’s deputies - a sharp affront and a humiliation for Merz.

A humiliating upset

Namely before the vote a trial ballot was held in which Merz obtained a comfortable, 12-vote margin. On that basis, his winning today’s vote was widely expected and the fact that he came up 6 votes short in the actual voting was a massive upset that never happened yet in Germany’s postwar history.

Eighteen deputies, some of them likely from his own party, voted against Merz. Given that the vote was anonymous, we don’t know who exactly voted nay, but it’s clear that some of his own coalition’s and/or even his own party’s deputies snubbed him, suggesting that there’s serious discontent among the representatives of Germany’s main establishment parties. Now the second round of voting has to be held within the coming 14 days. According to the latest reports, the second round might be held already today. But if Merz fails to obtain sufficient support the second time, new elections might have to be held, a chilling prospect for Merz’s CDU/CSU bloc, since it has been losing popularity quite sharply over the recent months:

These trends should not be surprising. In general most of the incumbent political factions across Europe have been losing grounds to populist, sovereigntists and anti-war factions and therefore putting Friedrich Merz forward as the front-runner of CDU/CSU would be like putting Antony Blinken (or Kamala Harris) as the leading candidate of the Democratic party in the US. In addition, has already proven himself to be a duplicitous warmonger and has broken a number of his electoral promises. For example adopted AfD’s anti-immigration stance before the elections only to reverse himself almost immediately after the elections. He also promised not to remove the constitutional debt brake, but broke that promise to push forward Germany’s new rearmament program.

A higher power intervened?

Leader of the ascending AfD party Alice Weidel gave a brief statement earlier today, articulating a sharp criticism of Merz. She accused him of electoral fraud and said that he set a record in breaking electoral promises, suggesting that this morning’s vote has damaged him and suggesting that he should simply withdraw his candidacy. Somewhat surprisingly, Weidel even suggested that higher powers may have been at work to prevent a Merz Chancellorship. Recall, Merz is a corporate lawyer, the former head of BlackRock in Germany and one of the most aggressive proponents of escalating the war against Russia in Ukraine.

BlackRock happens to have extensive investments in Ukraine, but surely that wouldn’t have clouded Merz’s judgment. Who would be so evil to risk another World War on the old continent and destroy his own nation (a-gain) just because his company has some investments in Ukraine? That would be unconscionable. Before the end of the day we might yet find out whether Weidel was right about the higher powers intervening or if there was simply a glitch in the matrix during the first vote. Either way, the old continent is sailing into rough waters and we’d all be better off without captain Merz.

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Today’s trading signals

With yesterday’s closing prices we have the following changes for the Key Markets portfolio: