Germany may slightly soften its stance towards its European partners if Chancellor Angela Merkel asks her Social Democrat rivals to form a coalition following this weekend's elections, analysts said Monday.
And that could bring much-needed progress in vital European integration even while Merkel maintains a policy of funding bailouts for stricken eurozone members only in exchange for tough reforms, analysts said.
In a stunning election triumph, German Chancellor Angela Merkel and her conservative CDU and CSU parties scored their best result in 23 years in general elections Sunday, winning 41.5 percent of the votes, not far off an absolute majority.
Merkel must now start the process of haggling with potential partners to find a governing alliance for Europe's biggest economy.
And a so-called "grand coalition" with Social Democrat (SPD) party -- a power-sharing arrangement Merkel used in her first term between 2005 and 2009 -- is looking the most likely outcome.
Analysts believe that such a coalition heralds no major policy changes, particularly with regard to Europe.
"Most Germans want a grand coalition led by Merkel according to opinion polls," said Berenberg Bank chief economist Holger Schmieding.
"After a long election night, they will almost certainly get their wish granted. The impact on policy will be small, with hardly any change on the European level and a modest tilt towards a centre-left agenda at home," he said.
UniCredit economist Andreas Rees said that "a renewed grand coalition will continue to steer a euro-friendly course.
"It could even be the case that the new government is (marginally) more constructive on Europe than before," he said.
Even with the start-up anti-euro party, the AfD, scoring 4.7 percent of the votes -- not enough to win it any seats in parliament -- "the overwhelming majority of Germans remains fully committed to the European cause," Rees pointed out.
"The continuation of euro-friendly policies after the election will enable further much needed progress in European integration," he said.
Gilles Moec, co-head of European Economics Research at Deutsche Bank, said that "as we are probably moving towards a CDU-SPD coalition, and since the Bundesrat (or upper house of parliament) continues to be dominated by the centre-left, it is likely that Germany will not break-away from the reformed 'Sozialmarkwirtschaft' (social market economy) it has inherited from the (SPD chancellor Gerhard) Schroeder and past Merkel governments.
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Germany's stance on Europe through the crisis "has been increasingly co-managed between CDU and SPD, while Merkel faced increasing dissent in her own party and FDP was in favour of a tougher approach to the periphery," Moec told AFP.
"In a coalition this co-management would become more formal, but the overall message from Berlin to the rest of Europe is unlikely to change," he said.
Thomas Harjes at Barclays Research suggested it could take some time before Merkel's CDU/CSU parties strike a deal with the SPD.
In 2005, the coalition talks lasted two months.
With the CDU/CSU winning around 42 percent of the votes compared to 26 percent for the SPD, Merkel's conservatives "would be the stronger partner but the SPD may still insist on some of its key policy proposals," Harjes said.
In terms of domestic politics, these could include a nationwide minimum wage, higher income tax rates to finance additional investment and education expenditure, and stricter regulation, especially for the financial sector.
But "at the European level, we do not expect much change from Merkel's current stance and continued support for weaker euro area member states," he said.
Schmieding at Berenberg Bank believed that Berlin's euro policies would remain "virtually unchanged" with "no euro bonds or other serious mutualisation of debt."
Carsten Brzeski at ING DiBa similarly believed that "for the eurozone, a grand coalition would probably continue the current crisis management but with a softer hand.
"Eurobonds are unlikely but some new European investment initiatives and a soft push towards hidden burden sharing could be the result of a grand coalition," he said.
"Even a kind of redemption fund, a eurozone bank resolution fund and far-reaching integration could eventually enter the eurozone's centre stage with a grand coalition," Brzeski said.
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