With three months to go before Germans go to the polls, Chancellor Angela Merkel put her cards on the table on Monday, maintaining her tough stance on austerity for debt-ridden euro zone nations in an election manifesto that could be at the center of EU policy for the next five years.
"Against the background of the different (parties') election manifestos, the election results could have an impact on Germany's euro crisis management," Carsten Brzeski, senior economist at ING said.
According to Brzeski, a continuation of Merkel's government would lead to status-quo when it comes to fighting the euro zone crisis. Merkel has blocked the creation of Eurobonds and under her Germany has resisted further burden sharing and financial integration of the euro zone.
If however, the election leads to a mixed result with a grand coalition of the CDU and the opposition center-left SPD, there could be a somewhat stronger push towards more integration, particularly on the banking union, but not necessarily on further burden sharing, Brzeski said.
But if the opposition were to win and a coalition of the SPD and the Greens would come to power, Germany could be ready to take a "quantum leap" with a fully-fledged banking union, possibly even with a common deposit insurance scheme, a debt redemption fund and some form of Eurobonds, Brzeski said.
The document put forward by Merkel's center-right CDU/CSU party on Monday outlines a series of generous family-friendly policies for Germans, described by some as a lurch to the left to attract as many voters as possible.
It includes measures which are in sharp contrast to the fiscal reforms Merkel has insisted other euro zone countries undertake. Among them are a rise in child benefits, provisions for flexible working hours, plans for more affordable housing, rent control as well as fresh spending on infrastructure and pensions. German newspaper Handelsblatt said the measures would cost as much as 28.5 billion euros.
"The CDU/CSU is by far and away in the lead and when you're in the lead you can act like a sailor who's winning the race. You just look at the boat behind you; when they go right you go right, when they go left, you go left. You'll stay ahead of them," Irwin Collier, professor of economics at the Freie Universitaet Berlin told CNBC.
The latest opinion polls show that Merkel's CDU/CSU would get 40 percent of the vote while the Free Democrats – the party's preferred coalition partners – would get 6 percent. If Germans were to elect their Chancellor directly, Merkel would win 58 percent of the vote, leaving her main contender, the social democrat candidate Peer Steinbrueck far behind with only 15 percent. Support for Steinbrueck's SPD party stood at 22 percent while the Greens had 18 percent of the vote.
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Merkel has come under fire for the high price tag associated with the measures outlined in the election manifesto, but insists that they will not place new burdens on the taxpayer or the economy. Instead, she argues that more freedom will increase the chances of higher tax revenue.
"One of the very optimistic assumptions in this platform is that economic growth will be strong enough so that there will be additional tax revenue to finance everything. If that really will happen, that's something we'll have to see," Collier said.