(CNN) -- Re-elected German Chancellor Angela Merkel is eyeing a new coalition to replace the "grand coalition" her Christian Democratic Union (CDU) party shared with the Social Democratic Party (SPD) in the previous parliament.
Angela Merkel has pledged to be "a Chancellor for all Germans".
If, as expected, Merkel forms a new coalition with the Free Democratic Party (FPD) it will have wide-reaching implications for Germans.
The FPD are more economically liberal than Merkel's previous partner, the SPD.
According to CNN's Fred Pleitgen, the FPD led by Guido Westerwelle will push for control of some key positions in the new government, including perhaps the finance ministry.
Pleitgen believes that economic policy is likely to change dramatically. "This means a whole lot more pro-business politics for Germany than in the past. You'll probably see tax cuts and it will probably mean smaller government than seen in the past four years," he said.
Speaking at a post-election news conference on Monday, Merkel said that the result is an opportunity to build a smaller government.
"If one looks at the majority relationships, we will be dealing with a smaller partner, the FDP," she said.
"We are happy to use this chance in very difficult economic times to secure jobs, create new ones and drive growth more decisively."
Merkel also pledged to be "a Chancellor for all Germans".
The election was disastrous for her rival, foreign minister Frank-Walter Steinmeier and the SPD who saw their vote fall 10 percent from 34.2 percent in 2005 to 23 percent. The result is the SPD's worst result since World War II.
The results leave the CDU as the strongest party in the German parliament with 27.3 percent of the popular vote -- slightly down on the 27.8 percent it achieved four years ago.
Despite being the biggest party in the Bundestag, the vote marked one of the CDU's poorest showings in an election. But its traditional coalition with the Christian Social Union -- who won 6.5 percent of the vote -- means that the CDU/CSU bloc won 33.8 percent of the vote.
The biggest winners on election night were the Free Democratic Party (FPD) whose share of the vote rose nearly five percent from 9.8 to 14.6 percent.