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February 11, 2017
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At a meeting in Munich, the executive committees of the CDU and the CSU have largely demonstrated unanimity and the willingness to close the ranks behind Chancellor Merkel in the imminent election campaign after months of tension over Merkel’s refugee policy. The meeting is meant as the start signal of a joint campaign which aims at keeping Chancellor Merkel in office and preventing a “left republic”, the term the CSU uses to describe a coalition among the SPD, the Left and the Greens. As an anchor for a common campaign a joint election platform shall be launched. The platform is likely to focus on external and internal security, (income) tax reductions, support for families, prosperity and jobs and European policy. The Bavarian CSU, however, will stick to its demand for an upper limit on migration of 200,000 p.a. as a major element of its own complementary platform for Bavaria, weakening the signal of unanimity at a time when the SPD is surging in polls. [more]
Germany: CDU & CSU team up to clip Schulz' rise 11 February 2017 Focus Europe Germany: CDU & CSU team up to clip Schulz' rise Barbara Boettcher Senior Economist +49-69-910-31787 Dieter Braeuninger Economist +49-69-910-31708 Oliver Rakau Economist +49-69-910-31875 ■ At a meeting in Munich, the executive committees of the CDU and the CSU have largely demonstrated unanimity and the willingness to close the ranks behind Chancellor Merkel in the imminent election campaign after months of tension over Merkel’s refugee policy. ■ The meeting is meant as the start signal of a joint campaign which aims at keeping Chancellor Merkel in office and preventing a “left republic”, the term the CSU uses to describe a coalition among the SPD, the Left and the Greens. ■ As an anchor for a common campaign a joint election platform shall be launched. The platform is likely to focus on external and internal security, (income) tax reductions, support for families, prosperity and jobs and European policy. ■ The Bavarian CSU, however, will stick to its demand for an upper limit on migration of 200,000 p.a. as a major element of its own complementary platform for Bavaria, weakening the signal of unanimity at a time when the SPD is surging in polls. At the start of the week the executive committees of the CDU and the CSU headed by Chancellor Merkel and the Bavarian MP Seehofer respectively have met in Munich to discuss the sister parties’ campaign for the federal election on September 24. The meeting is also meant as the start signal of a joint campaign. The grandees from both parties have largely demonstrated unanimity and their willingness to close the ranks behind Chancellor Merkel. With the meeting both sides seem to have put an end to an extended period of bickering among the sister parties and their leaders, Merkel and Seehofer, too. The accord became more likely in recent weeks, given Mr. Seehofer’s hints in this regard. The CDU and Chancellor Merkel have paved the way for the confirmation of this traditional cooperation by moving to a more restrictive asylum policy stance over the course of the past year. The revised policy approach is based on new laws and regulations from the federal government which reduced benefits for immigrants and lowers the barriers to deportations, among others. The refugee influx has also lost relevance as an explosive political topic, given the substantial decrease in the relevant figure from about 900,000 in 2015 to 280,000 in the past year and around 200,000 in 2017 extrapolating recent numbers. Also, the nomination of the popular Martin Schulz as the SPD‘s chancellor candidate is likely to have forced the two parties to come to terms. After the nomination a few days ago Mr. Seehofer, e.g., stated that it would make the campaign more challenging. And in fact, Schulz has had an impressive start which also has benefited his party. According to recent surveys (Infratest dimap, Emnid) the SPD’s popularity rating has jumped by 5 to 6pps (to 28% and 29% in the respective surveys) while the CDU/CSU, the Greens and the AfD have lost. In one poll (INSA) the SPD even comes in ahead of the CDU. According to the most recent ARD-Deutschland- Page 2 Deutsche Bank AG/London 11 February 2017 Focus Europe Trend (Infratest dimap) Mr. Schulz’ approval ratings even surpassed Chancellor Merkel’s ratings. Given the SPD’s unexpectedly strong recovery, commentators (form FAZ newspaper e.g.) have argued that Seehofer might have overplayed his power game with Merkel to her and to both sister parties detriment. At the moment this is speculative and time will tell with seven and a half months to go until the election. While now the CSU’s grandees, too, have clearly expressed their support of a fourth term for Chancellor Merkel, neither the representatives from the CDU nor from the CSU have revealed preferences for a future coalition partner. Instead, they have stressed their common goal to prevent a “left Republic” (CSU), i.e. a coalition government of the SPD, the Left and the Greens. Both sister parties have emphasised to primarily promote the conservatives’ own attractiveness. As an anchor for a common campaign a common election platform shall be launched. The platform is likely to focus on external and internal security, (income) tax reductions, support for families, prosperity and jobs and European policy. The latter issue is likely to play a major role in the contest with the SPD’s candidate, as campaigners from the conservatives have already confronted Mr. Schulz with his former plea for Eurobonds  1 and accused him of laxness with regard to the Euro area fiscal/ deficit rules  2 . Moreover, it remains to be seen, whether Schulz will propose new policies, or whether he will largely stick with the known SPD policies, which could dampen the appeal of a “fresh” candidate. The CSU‘s major request, an upper limit on migration, however, will not be included in the common election platform. This is no surprise, as the CDU and especially Chancellor Merkel have repeatedly opposed such a limit. The Chancellor has argued that Germany needs to act flexible with regard to the admission of refugees depending on the situation in countries of origin like Syria. For the CSU, however, the upper limit on immigration (of 200,000 people p.a.) has become part of its mantra and therefore the party will stick to it. As an alternative to the common platform, it will become a major element of its own supplementary platform, the plan for Bavaria. This plan shall underline the CSU’s self-reliance in the imminent campaign but it also aims at securing the CSU’s majority in the state elections in Bavaria in autumn 2018. While this is quite some time in the future, the intention is to prevent a further strengthening of the AfD on the regional level, too. 1Ein Linker ist er nicht. FAZ 25.01.2017 http://www.faz.net/aktuell/wirtschaft/wirtschaftspolitik/spd- kandidatmartin-schulz-ein-linker-ist-er-nicht-14754979.html?printPagedArticle=true#pageIndex_2 2Eg. the CDU’s general secretary Tauber. See https://www.cdu.de/artikel/zukunftstreffen-von-cdu-und- csumuenchen) Deutsche Bank AG/London Page 3 11 February 2017 Focus Europe Figure 1: Whom the Germans would elect as chancellor* 0 10 20 30 40 50 60 70 80 Total CDU/CSU** SPD** Left** Greens** AfD** FDP** Undecided Merkel Schulz Early-February, % * if there waa a direct election ** Supporters of the respective party . Source: Infratest dimap: ARD Deutschland-Trend, Deutsche Bank Figure 2: Major German political parties' popularity* 0 5 10 15 20 25 30 35 CDU/CSU SPD Greens Left AfD FDP Others Surveys from end-January to early-Feb. 2017, % * Average of major surveys (Allensbach, Infratest Dimap, Forsa, Forschungsgruppe Wahlen, TNS Emnid). Source: Wahlrechte.de, Deutsche bank Page 4 Deutsche Bank AG/London 11 February 2017 Focus Europe Appendix 1 Important Disclosures *Other information available upon request *Prices are current as of the end of the previous trading session unless otherwise indicated and are sourced from local exchanges via Reuters, Bloomberg, and other vendors. Other information is sourced from Deutsche Bank, subject companies, and other sources. For disclosures pertaining to recommendations or estimates made on securities other than the primary subject of this research, please see the most recently published company report or visit our global disclosure look-up page on our website at http://gm.db.com/ger/disclosure/DisclosureDirectory.eqsr Analyst Certification The views expressed in this report accurately reflect the personal views of the undersigned lead analyst(s). 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