What do the Bavarian election results tell us about next week's general elections?

Yesterday’s Bavarian state elections saw a clear victory for the CSU, Merkel’s CDU sister party at the federal level, securing 47.7% of votes in the 180-seat state legislature. That translates into 101 seats for the conservatives, 10 more than needed to form a majority government.

Results of the Bavarian state elections

So what could that mean for next week’s general elections?

• Could the results provide a boost to the CDU/CSU and push them an absolute majority at the federal level? This is very unlikely given that the CDU/CSU haven't won an absolute majority at the federal level since 1957 whereas an outright majority for the Conservatives in Bavaria is rather the status quo (except for the previous coalition with the FDP, the CSU has enjoyed an absolute majority for 56 years). 

• Furthermore, both the CSU and the SPD gained percentage points compared to the previous elections. This result was basically in line with the large majority of pre-election polls. So it won’t necessarily give either party an edge for the next week’s general elections.

• The FDP lost 4.7% compared to previous state elections and, with overall result of 3.3%, missed the threshold to enter the Bavarian state parliament. This could be seen as a bad omen for next week's general election and may raise the chances of a grand coalition. That said, tactical voting (from CDU/CSU) voters is an important part of FDP support. This result could prompt an increase of such voting at the general election, as CDU/CSU voters fear an FDP failure and the move towards a grand coalition. FDP leader, Philipp Rösler, called its party’s result in the Bavaria elections “a wake-up call”. It could end up being exactly what the party needed to secure its entry to the Bundestag.

• It's also worth noting that the FDP has traditionally faired badly in Bavaria and rarely makes it into the parliament - the last election then was an exception, rather than the rule. Furthermore, the CSU feared losing an absolute majority so many supporters voted tactically at the previous election, at this one the majority was essentially assured.

• The usefulness of the Bavarian elections as a bellwether for the general elections should not be overestimated either - the CSU dominates, while the Free voters also have a strong support base but the Greens traditionally struggle. It's also worth keeping in mind that Alternative fur Deutschland did not run in the elections.

The general reading seems to have been that this is a bad sign for the current coalition government with the FDP struggling. That could well be true, but it may just end up being the sign that supporters of the current coalition needed to vote in a way which ensures extra FDP support. All still to play for then next week.

European regionalisation: do two negatives make a positive?

As we've argued before, there's a lesson for the eurozone to learn from the all the semi or full-blown separatist movements across Europe; trying to impose central control on an inherently regionalised structure is extremely difficult and artificially imposing a top-down identity remains as challenging as ever. At the same time, should a region choose to leave an EU county it could, after negotiations, be absorbed by the European structure, which in turn would have a stabilising effect on the tumultuous politics that will follow.

Therefore, separatist movements across Europe simultaneously showcase both the weakness and strengths of the European project. However, what's clear is that the austerity sweeping Europe is not only creating tensions between national capitals and Brussels, but also national capitals and regions. Just in case you thought the eurozone was on the verge of a agreeing a transfer union....

Belgium

The Flemish are as unhappy as ever about their domestic transfer union, and this weekend, local elections in Belgium saw the moderate Flemish nationalist N-VA party make substantial gains, using the €16bn a year that Flanders sends to the Francophone region as a political springboard. A leader in Belgian daily De Morgen notes that that the N-VA's objections to "the left-wing tax government of [Belgian PM Elio] Di Rupo don't differ that much from "the criticism in other countries of the [eurozone] solidarity mechanism which keeps the Greeks or Spaniards afloat".

Spain

In Spain, the Catalan independence movement is stepping up a notch off the back of Madrid (and Brussels) imposed austerity measures. In September, a pro-independence rally in Barcelona (pictured) mustered between 600,000 and 1.5 million people depending on whether you ask the Catalan or national police. The Catalan government has said it wants to hold a referendum on independence, with a majority of Catalans in favour according to some polls. A motion to permit a referendum was voted down by a majority in the Spanish lower house and could trigger a constitutional crisis if Catalan PM Artur Mas goes ahead with the plans regardless. Spanish Prime Minister Mariano Rajoy has said holding a referendum without the central government's approval would violate the Spanish Constitution.

Italy

The Lega Nord party has been calling for the separation of Italy's northern regions from the rest of the country. Possibly the main difference between the Italian case and the others, is the fact that the geographical entity evoked by Lega Nord (the so-called 'Padania', including all the regions above the Po river) has never existed as an independent state. Furthermore, Lega Nord has usually been more or less aggressive in its pro-independence claims depending on whether the party was in government or in opposition. Nonetheless, many northern Italians do feel that too big a chunk of the taxes they pay is then used to fund 'dysfunctional' Southern regions. Potentially one to watch, especially if Lega Nord (as it looks likely at the moment) will stay in opposition after next year's elections. 

Germany

While there is no talk in Germany of an independent Bavaria just yet, in July the regional government announced that it will launch a complaint at the German Constitutional Court against the German system of "Equalization payments" between richer and poorer German Bundesländer. Bavaria is the main net contributor to this system with €7.3bn, sharing the burden with only three other states - Hessen and Baden-Württemberg and Hamburg). The rhetoric of Bavarian politicians on the eurozone crisis has also been notably tougher than that of other German politicians as we've noted here. Meanwhile, a recent Bild poll found that 46% of Germans were against the separate West-East solidarity income tax levy compared with 42% in favour.

United Kingdom 

In Scotland the Scottish National Party has won its battle for a independence referendum with Scots being given a single Yes/No question on independence to be held in 2014. The prospects of Scotland becoming independent have however, in contrast to other regions, been damaged by the eurozone crisis with previously favourable comparisons with Ireland and Iceland being turned into examples of the problems of small economies with oversized financial services industries. Other questions that are beginning to be asked are whether an independent Scotland will use the euro (decreasing in popularity) or retain the pound, remain in the EU or have to have border controls. It has also been noted, including by the EU Commission, that Scotland would have to negotiate its EU membership afresh rather than opting in by default off the UK's entry in 1973.

Meanwhile in Brussels...

European Council President Herman Van Rompuy has presented a report calling for a central eurozone 'Treasury' with a shared budget and eurobonds - very close to a full-blown trasnfer union.

In Brussels, the logic seems to be that two negatives make a positive.

Bavarians are getting increasingly restless over eurozone bailouts

Debt-pooling goes down less well in Munich

Its not just Spain that has a problem with its regions. Over in Germany, Bavaria is getting increasingly angry over the additional burdens imposed on Germany as a result of the eurozone crisis - both via the existing bailout funds and possible future burdens via eurozone debt pooling. This is because in addition to its strong regional identity, it is the wealthiest of Germany's 16 states; a bigger burden on German taxpayers therefore equals a bigger burden on Bavaria.




The day after Moody’s placed Germany as a whole on negative outlook, it placed Bavaria and five other German states on negative outlook as well. While the German government reacted quite stoically – saying it had “taken note” of the decision – the response from Bavaria to its 'outlook downgrade' was far more robust. The state’s Finance Minister Markus Söder told Süddeutsche that:

"The Bavarian finances are in top condition, we are paying back our debts. I would expect us to win a gold medal.”

The state’s Prime Minister, Horst Seehofer argued that the decision "ought to send a warning signal to the rest of Europe". Both politicians come from the CSU, the Bavarian sister party to Angela Merkel’s CDU, which governs Bavaria with the FDP as its junior coalition partner. In the German debate, the CSU has taken the hardest line on Europe’s so-called ‘debt sinners’; yesterday Söder became their latest senior politician to explicitly call for Greece to leave to eurozone – in contravention of the government’s official position, while in an interview last week the party’s General Secretary Alexander Dobrindt said that:

"With Greece we have reached the end of the road. There must not be any further aid. A country which does not have the will to fulfil the conditions, or is not able to do so, must get a chance outside the euro”. 

However, it is not just Greece that has attracted the ire of the CSU – in the same interview Dobrindt laid into the opposition SPD and Green parties, describing their positions on the eurozone crisis as a “betrayal of German interests”:

“We will defend the bastion that is Bavaria against the onslaught of the left… The [upcoming regional and federal] elections will be hard clashes with the opposition parties over major social issues: the SPD and Greens want German taxpayers’ money in exchange for eurobonds. They represent the interests of the Socialist International and not those of German citizens. They are preparing the ground – together with the French President [Hollande] – for a ‘eurosocialism’. Their egalitarianism comes at the expense of Europe’s top performers [and will] threaten the prosperity of Europe.”

Dobrindt’s intervention is noteworthy because it is the first time that a senior mainstream politician has explicitly called for the eurozone crisis - and longer term questions such as eurobonds - to be made into defining issues in next year's elections. Until now, despite accusing Merkel's government of poor political management, the SPD and Greens have broadly taken the same structural approach to the crisis - i.e. bailouts and savings/reform packages, albeit with additional emphasis on 'pro-growth' measures. It will be interesting to see if and to what extent Merkel and the CDU will heed Dobrint’s call to adopt a tougher tone.

Bavaria’s position in Germany can be seen as a microcosm of the eurozone as a whole – together with neighbouring Baden-Württemberg they largely subsidise public expenditure in the Western Länder and the former DDR – the latter via a statutory ‘Solidarity payment’ on top of general taxation. Given that many Bavarians are unhappy with this arrangement - the state government recently launched a legal challenge - their resistance to funding another ‘solidarity payment’ – this time for the Mediterranean bloc – should not be underestimated. Earlier this month, Seehofer warned that:

“Eventually, a point will be reached when the Bavarian government and the CSU can no longer say 'yes' any more [and] the coalition has no majority without the CSU's seats.” 

While this is unlikely to happen any time soon, the CSU’s resistance will severely restrict Merkel’s ability to place further eurozone rescue related burden on the German taxpayers in the remainder of the current parliamentary session and beyond.

As Germany as a whole faces the question of how it will respond to the crisis in the longer term – with a range of options running from a break-up to more political and economic integration – expect Bavaria to be at the forefront of the resistance to the latter option.