video transcript

A day after a bitter election defeat - German Chancellor Angela Merkel wasn't letting her disappointment show. Her Christian Democrats lost power in the industrial and agricultural region of Lower Saxony. SOUNDBITE: German Chancellor Angela Merkel, saying (German): "I won't beat around the bush - after such a rollercoaster of emotions, of course a defeat hurts even more. And so today we were all quite sad." There was just one seat in it but her party's candidate David McAllister was beaten by the combined force of the Social Democrats and the Greens. It's the latest in a string of party defeats and a personal blow for Merkel. She's hoping to get re-elected herself later in the year and is still favourite to win a third term, says Patrick Armstrong from Armstrong Investment. SOUNDBITE: Patrick Armstrong, Managing Director, Armstrong Investment Management, saying (English): "The election's not until September, so I don't think you can make any strong statements about who's going to be in charge come September, but it does show things are very close." The election result didn't worry German investors. Merkel's defeat does give the opposition centre-left a majority in the upper house of parliament - meaning they could block her government's laws. And she may now have to take a more cautious stance. But Robert Halver from Baader Bank doesn't think it will alter her management of the euro zone debt crisis. SOUNDBITE: Robert Halver, Baader Bank, saying (German): "The Social Democrats and the Greens now have a majority in the upper house of parliament, so they will share the responsibility - and this means that the European peace movement, I mean the stabilisation of the euro zone, will carry on in the lower house." Merkel has consistently won praise for her handling of the crisis. She must hope that's what matters to voters come the federal election in September.