"Given the way the talks now failed, a minority government looks unlikely," he added. If Merkel were to lead a minority government, passing legislation in the Bundestag would be a political nightmare given the differences between the several parties.
The second possibility — a so-called grand coalition — would mean Merkel`s CDU sharing power with the Socialist Party, something that it did until the elections in September. However, this is also unlikely given that the latter has stated repeatedly that it wants to stay in opposition and rebuild.
"This realistically only leaves one option: new elections," Brzeski said. However, it`s even uncertain whether the political impasse could be solved with a new vote.
Marc Ostwald, global strategist at ADM Investor Services International. said in an email that "as a point of historical note, there is no precedent for fresh general elections so quickly after the previous one."
"I would not want to second guess this situation, but with Steinmeier being president, and the risk that any or all of the CDU, SPD and FDP take a hammering if fresh elections are held, it (a minority government) might be the compromise outcome," he said.
Dramelin
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