Investors should not get too optimistic over the formation of the next German government, according to analysts, who believe the policies of the country's lawmakers still remain very vague and there is still a chance that fresh elections will be needed.
The Social Democratic Party (SPD) narrowly approved the start of formal coalition talks with Angela Merkel's Christian Democrats on Sunday. This follows months of uncertainty after elections in September failed to produce an overall majority for any party.
This caused a rise in stock markets on Monday morning, most notably on the German DAX, but Leopold Traugott, a policy analyst at Open Europe, told CNBC that the intentions of the next government are still far from being concrete.
"In many European capitals, in particular Paris and also Brussels, people were very happy about yesterday's (Sunday) results," he said.
"We have to be careful not to exaggerate in what this new government wants to achieve and can achieve. Yes, the coalition agreement as it stands so far is very pro-European, they want to reform the euro zone, a more social Europe, but it's all very vague still," Traugott warned.