Angela Merkel of the Christian Democrats looks set to continue as Chancellor in Germany following elections. However the Social Democracts have lost their position as government coalition partner and in doing so the baton has been passed to the smaller anti-socialist pro-market Free Democratic Party. This strengthens the hand of Merkel to deliver on promised tax cuts as well as labour market reforms. Given the size of the German economy this could be good for tax competition across the entire European Union. Germany should be well worth watching over the coming months.