German Policy Watch

 

February 22, 2013

Germans like neither the present coalition nor fundamental political changes

  • With about half a year to go before the federal election on September 22 the outcome is still wide open. In most of the recent polls the government parties CDU/CSU and FDP as well as the opposition parties SPD and Greens have gained support, as smaller parties have lost ground. But there is no mood for a fundamental political change.
  • The CDU continues to benefit from Chancellor Merkel’s popularity and from Germany’s relatively favourable economic performance in the past few years. Additionally, the CDU is trying to co-opt some of the opposition’s major (social) policy topics. Thus the CDU hopes (i) to take the wind out of the SPD’s and the Greens’ sails and (ii) to open the doors towards these parties as potential partners for a new coalition after September 22.
  • With such a strategy, however, the CDU runs the risk of alienating its traditional voters in the conservative camp and the business community without being able to attract enough new voters from other camps like the urban population. Furthermore, one of the opposition parties’ key issues, namely more redistribution via higher peak income tax rates and the reintroduction of a wealth tax, has failed to secure broad approval among the voters so far.

With about half a year to go before the federal election on September 22 the outcome is still wide open. In most of the recent polls the government parties CDU/CSU and FDP have gained support and have reached up to 46% together. But the biggest opposition parties, the SPD and the Greens, have also managed to stabilise their combined share at 40% to 44%, as the Left party and especially the Pirates have lost support. From the present point of view, the Pirates, last year’s political shooting stars, will clearly fail to pass the 5% threshold necessary to enter the Bundestag.      

The CDU continues to benefit from Chancellor Merkel’s popularity. The skilful management of the euro crisis, which has also diverted attention from her government’s poor performance in domestic politics, is primarily attributed to her. Mrs. Merkel’s approval rates are still extraordinarily high (up to 61%), much higher than the rates of the SPD’s chancellor candidate Peer Steinbrück. Additionally, the relatively good performance of the German economy, and especially the labour market, should boost the government parties. There is no mood for a political change. According to the Allensbach Institute most Germans look towards the next twelve months with optimism.

Nevertheless, the present government is not popular. According to the latest Allensbach survey only 19% of the respondents think that a renewed CDU/CSU/FDP coalition would be beneficial for Germany. This presumably reflects the fact that the present coalition’s work has been accompanied by bickering since its start in autumn 2009. In the past few years this has been especially true for tax policy as the FDP has favoured substantial tax relief, while the CDU/CSU has welcomed higher tax receipts to foster budget consolidation. However, the coalition did pass a small tax cut bill in the first chamber of parliament, the Bundestag, but is being blocked in the Bundesrat, at least partially. More recently the coalition’s debate has focused on issues such as the labour market, social policy and energy policy.

The FDP, for example, rejects the CDU’s plans to introduce a broad net of industry-specific minimum wages or to supplement the pensions of low-wage earners. The FDP has already reluctantly agreed to the latest social policy act, the introduction of specific childcare subsidies for mothers who look after their little children at home.

In contrast to the FDP’s more market-oriented policy approach, Chancellor Merkel’s party is trying to co-opt some of the opposition’s major social policy topics. Thus the CDU hopes (i) to take the wind out of the SPD’s and the Greens’ sails and (ii) to open the doors towards these parties as potential partners for a new coalition after September 22. The CDU/CSU also advocates an FTT, officially so as to collect a contribution from the financial industry to the public budgets to partly compensate for the heavy losses of economic welfare and tax revenue caused by the financial crisis.

With proposals like the industry-specific minimum wages and higher pensions for low-wage earners to prevent poverty in old age, the CDU/CSU wants to present itself as a party which cares about citizens with lower incomes, too. Generally, a political course geared more towards social democratic issues seems to fit the voters’ mood. According to the Allensbach survey 33% of Germans are in favour of a grand coalition of CDU/CSU and SPD. Other possible coalitions are far less popular – SPD/Greens 27%, CDU/CSU/FDP 19% and CDU/CSU/Greens 14%.

Such a strategy, however, is not without risks for Merkel’s party. It repeatedly demonstrates the discord in the government camp. But a more centre-left orientation on the part of the CDU will make it easier for the FDP to regain support from the pro-business parts of its traditional constituency.

More importantly: the more the CDU/CSU co-opts the opposition parties’ topics, the more it runs the risk of alienating its traditional voters in the conservative camp and the business community. And it is up in the air whether the CDU will be able to attract enough new voters from other camps like the urban population, instead. The SPD frequently accuses the CDU of offering only half-hearted solutions to (presumed) social problems like old-age poverty. In contrast to the CDU, the SPD often favours deeper and more expensive state interventions. Thus the CDU has to walk a fine line.

The risks for the CDU have increased as the SPD/Green state governments (together with Brandenburg – SPD/Left) reached a voting majority in the Bundesrat (second chamber) on February 19 when the new SPD-Green government in Lower Saxony took office. The SPD and the Greens can now call the CDU’s bluff. On March 1, the SPD, e.g., will launch an initiative in the Bundesrat to start legislative proceedings for its own minimum wage act, namely a general Germany-wide minimum wage of EUR 8.50 per hour. Furthermore, the SPD will try to amend the much-debated law on childcare subsidies via the Bundesrat. The SPD and the Greens want to pay more subsidies to nurseries and all-day schools instead of non-working mothers. Of course, the initiative is primarily meant to attract attention, as not the Bundesrat but the Bundestag (lower house) has to decide on these proposals in the end. 

But one of the opposition parties’ key issues, namely more redistribution via higher peak income tax rates and the reintroduction of a wealth tax, has failed to secure broad approval among the voters so far. According to the Allensbach Institute only one out five Germans thinks that the present peak income tax rate is too low. (The respective rate is 42% liability for income from approx. EUR 53,000 to EUR 250,000 p.a. Higher income is subject to the so-called rich tax at a rate of 45% − plus 5.5% solidarity surcharge, respectively.) The institute concludes that at present the political priorities speak in favour of the CDU.

However, ballots will not be cast until September 22. The shape of the future coalition is still in the clouds. Given the parties’ desire to participate in the government on the one hand and the widespread unease among the SPD and the Greens about cooperating with Angela Merkel’s CDU on the other, even a coalition among the SPD/Greens and FDP cannot be ruled out.

 

Author :
Dieter Bräuninger +49 69 910 31708, dieter.braeuninger@db.com
 

 

 

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