Analysts at Deutsche Bank note that political fragmentation in Germany continued over the weekend.

• “The far-left and far-right now command over more than half of the seats in the German state parliament of Thuringia while prolonged leadership battles among the social democrats cast a shadow over the government coalition in Berlin.
• In yesterday's state elections in Thuringia, the Left of PM Bodo Ramelow came out as the strongest party, followed by the far-right AfD. The CDU suffered heavy losses, dropping from rank one in 2014 to the third place while the SPD moved to single digits.
• According to the results, no politically viable coalition reaches a majority, unless the CDU gets serious about dropping its previous categorical rejection of cooperating with the Left. In the end, a minority government led by the Left might turn out to be the most plausible option.
• No clear result was achieved in the SPD members’ vote on the party’s future leadership presented on Saturday.
• All in all, last weekend’s events have certainly increased the probability of an early GroKo demise, but we still think that the status quo forces are more likely to prevail; meaning that the GroKo treaty will be the ultimate arbiter in case of (more likely) conflicts.
• In case of snap elections over the course of 2020 (which is not our baseline), recent polls indicate a majority for a conservative-green government. Such a coalition would imply an even stronger climate/environmental focus but would hardly embark on a fundamentally different policy course from the current coalition or trigger a more expansionary fiscal policy – unless we were to see a deep recession materialise.”