German Elections: What is at stake? - Natixis

The German elections do not seem to attract the same interest as the French elections and yet they ought to, since if the conservatives of the CDU/CSU were to keep the Chancellery and the Ministry of Finance, their choice of government alliance will be decisive for European markets, suggests Sylvain Broyer, Research Analyst at Natixis.

Key Quotes

“Germany will be more open to the idea of a eurozone minister of finance and budget if the grand coalition remains in power.”

“In the event of an alliance of the conservative and the liberals it could, on the contrary, make a push towards a multi-speed Europe and towards adopting measures on country defaults.”

“At present, German voters would prefer to see another coalition with the liberals rather than a continuation of the grand coalition.”

“On the other hand, whatever coalition is formed, Germany is likely to change the direction of its fiscal policy somewhat, as most parties suggest tax cuts for households (around 1% of GDP) and an increase in public investment (0.5% to 1% of GDP). However, this will not result in a sharp reduction in the current-account surplus.”

“Unlike the debate in France, Europe is not a very divisive issue in these German elections:

• The electorate’s main concerns are the risk of poverty, a consequence of the reforms of the labour market and welfare regimes despite the full employment situation, the low return on savings and immigration control, the only issues on which they really expect actions from Europe. 
• The Chancellor’s concerns partly overlap those of the new French President. She seems to be focusing on tasks that go beyond the Eurozone’s institutional organisation: the G20 presidency, the defence of climate change agreements and the integration of refugees. The idea of a European minister of finance is conceivable under certain conditions, while debt mutualisation remains a taboo. 
• The German view of Europe still differs from the French. The first are systematically less convinced than their neighbours of the need of pooling financial resources.”