Merkel's victory reassures markets, Hollande sends congratulations

French president François Hollande was the first European leader to congratulate Germany’s Angela Merkel after poll estimates showed a clear win in Sunday’s elections.

Reuters/Kai Pfaffenbach

In a phone call just after the first poll estimates were released, both leaders “expressed their willingness … to continue their close co operation to meet the challenges of the European project,” according to a statement from Paris.

Hollande also invited Merkel to Paris once her government is formed.

In the final result, Merkel’s conservative Christian Democrats scored just short of an absolute majority and she will now have to begin talks to form a coalition.

The pro-business Free Democrats (FDP), Merkel’s junior coalition partners until the election, had a bad night, losing all their seats for the first time since their creation after World War II.

They paid the price after bitter internal power struggles.

On Monday, Merkel said her party was “open for discussions” and that she had already had contact with the rival SPD (Social Democrat) party who would hold their own party meeting on Friday.

Merkel’s CDU trounced the SPD, scoring 41.5 per cent next to their 26 per cent.

Nevertheless, a so-called “grand coalition” between Germany’s two biggest parties, who governed jointly between 2005 and 2009 is a strong possibility.

Speaking on Monday though, Merkel did not rule out a potential coalition with the environmentalist Green Party, who slipped to 8.4 per cent, down from the 2009 elections.

The major hurdle to power-sharing with the Greens has now been removed after Merkel’s spectacular U-turn on nuclear energy when she decided to phase it out following the Fukushima disaster in Japan in 2011.

Analysts say it could be weeks before any coalition is formed.

Congratulations poured in from Merkel’s fellow EU leaders, while the Euro rose against the dollar in Asian trade on Monday after the resounding victory and the continuity it heralds.

Most investors and analysts agree that whichever party Merkel chooses as a coalition partner, policy affecting Europe is unlikely to change greatly.

Though the SPD has advocated a slightly less austerity-dominated approach to the Euro crisis, it largely backed Merkel’s decisions in parliament.

European leaders will be watching the progress of Germany’s new AfD party, created only six months ago, which advocates ditching the Euro and an “orderly dissolution” of the 17 member eurozone.

Though it failed to win any seats, many were surprised at the number of votes the party won, the first time a eurosceptic party has ever gained a foothold in Germany.

Overall turnout was 73 per cent, up more than two points since 2009.