A few weeks and the Germany will return to the polls to elect the new one Bundestag (German Parliament). The big news is that after 16 years the government will no longer be led by Chancellor Angela Merkel, but the scenarios that emerged from the polls and the possible coalitions that will be formed allow glimpses of glimpses positive for i markets. These ideas emerged from the analyzes on the subject carried out by Candriam and Ing.
Towards the elections
In less than a month, precisely on September 26, the Germany will go to vote. According to the latest surveys, the elections will be followed by a series of negotiations that will aim to create a coalition, most likely between three parties. Once this process is concluded, the new Chancellor will be appointed who will succeed Angela Merkel.
In the meantime, however, Berlin is facing numerous internal and external challenges, including an aging population, technological change and digitization, the climate emergency, the growing role of China, public spending and risk sharing in the Eurozone. While some of these challenges have been exacerbated by the pandemic, there is no sense of urgency needed to address these important issues in the election campaign.
What the polls say
The most recent polls are rewarding therise of the SPD. The conservative center-right bloc of the Union, CDU (Christian-Democratic Union of Germany, that of Merkel) and CSU, (Christian-Social Union in Bavaria), after the loss of momentum recorded during the summer, is no longer in favor of the prediction. Likewise, the Green Party lost ground throughout the election campaign. Due to the pandemic, it is expected that there will be a surge in correspondence votes, around a level of 40% -50%, compared to 28.6% in the previous political elections in 2017 and 24.3% in 2013. This is an important fact, as postal voting has already been opened throughout Germany on August 16.
One thing seems clear. In Germany the match who will win the elections will also need to get a majority in the Bundestag, which is why they usually try to form one coalition in Parliament with another party. It seems unlikely that a net result will come out of the polls and the party that wins the elections will have to form a coalition not with one party but perhaps with two and this will greatly complicate the talks to form a coalition.
Kantar, Forsa, INSA, survey period: calendar week 33/34; ING Economic & Financial Analysis
The political scenarios
The possible scenarios are diverse and range from a conservative or SPD-led government, with the Greens and the free-market oriented FDP (Liberal Democratic Party) to a SPD-led government with the Greens and Die Linke, the Social Democratic Party . This latest coalition, which would represent the most radical change from the current status quo, is not the most likely scenario anyway since Olaf Scholz, current finance minister and SPD candidate for the Chancellery, is not a “leftist”.
Despite a election campaign unconvincing, for the first time since October 2005 there is a concrete possibility that the Green Party will join the government. From a political point of view, it must be taken into account that the Green Party would probably prefer a junior partner position in a government led by the SPD rather than a government led by CDU / CSU, while the FDP would prefer the opposite scenario.
Air of renewal
In a recent survey of the Bertelsmann Foundation, a large majority (61.5%) of respondents said they were in favor of a change in federal government. This view was expressed by all voters except those affiliated with CDU / CSU. Among the top five areas for which voters expect significant political change or even a new beginning, the environment and the fight against climate change occupy a leading role, followed by immigration, pensions, education. In fifth place is the need for a change in the policy of combating COVID-19, which clearly does not seem to be a priority issue for Germany. It is curious how the German media did not pay particular attention to these issues, preferring instead to present the pre-electoral political positions of the candidates of the various parties.
the first federal elections without the candidacy of the outgoing chancellor, they in themselves mark a change in leadership. However, as a qualified majority of two-thirds is needed to remove the debt brake or to make the European Recovery Fund permanent, in a context where no governing coalition is likely to win so many votes, we should not expect. no revolutionary political change. We believe that Germany’s responses to the most pressing questions will actually be positive for the markets, as we believe they are likely to translate into increased infrastructure spending and fostering domestic demand in other areas. Furthermore, a more accommodative fiscal policy, greater support for the banking union and more room for maneuver in the upcoming discussion of Eurozone fiscal rules could ultimately reduce the risk premium for a Eurozone dissolution.
The future of the country
Therefore, the Germany runs quickly towards the vote, the latest findings clearly indicate the candidate Scholz and theSPD as favorites, although the German political system will likely dictate the need to form a coalition with one or two parties to form a stable majority. Thus the new executive will come to life, which will have the onerous task of not making Angela Merkel regret it by making the most of the post-Covid recovery.