Jamaica, Germany, Semaphore, Kenya: stable markets, rising stock market, flat or slightly rising Bund yields. Red-red-green coalition: Stock market down and Bund yields up sharply. Markets and the business world have already voted.
Between hypothesized three-party coalitions in future political scenarios after today’s vote, Jamaica (black, green, yellow) made up of Cdu-Csu, Die Grünen and the liberal Fdp is the one that the markets like best: it is the favorite of institutional investors and entrepreneurs Germans because of all it is considered the closest to industry and the tradition of the social market economy.
The Greens would join a tripartite government that would be led by the CDU leader Armin Laschet, which notoriously has a penchant for liberals and which would mainly focus on the support of the FDP: this coalition would guarantee greater progress towards climate neutrality, increasing public investments for green modernization and digitization of the country, limiting the use of public debt .
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The “Germany” Cdu-Spd-Fdp coalition is unlikely
The German coalition (black, red, yellow) is also good for the markets and the stock exchange because the CDU, SPD and FDP have already been government partners under the leadership of Chancellor Angela Merkel: it is a guarantee of continuity and stability. But this coalition, according to polls, is among the least likely.
The financial world and businesses, with the exception of the real estate market, are now ready to tolerate and hope for the best in a scenario with the Cdu-Csu Union in opposition. There “traffic light” coalition (red, yellow, green) with a government led by moderate social democrat Olaf Scholz can modernize Germany and lead it towards climate neutrality without too aggressive a social policy, because the FDP would be there to pull the brakes. In this coalition, Germany would increase public investment and public debt to accelerate the green transition and digitalization: the markets are confident in Scholz’s ability to stem pressure from the far left wing of the SPD and the excessive debt Greens. The fiscal policy of a Scholz government would use all possible flexibility to enhance investments, staying within the framework of budgetary discipline, aiming at a return to balance and the future reduction of debt / GDP: medium-long term goals that reassure the markets .
Markets are ready to welcome one coalition Kenya (black, red and green), which would be a large GroKo coalition like the current one, enhanced with the green turbo: but this scenario, for German political commentators, is among the least probable.