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Bundestag elections 2017

2017 has been a mega election year for Europe. After the Netherlands and France, Germany went to the polls with federal elections on September 24 (Italy will not vote until spring 2018.) Chancellor Merkel (CDU) campaigned for her fourth term, her main contender being the former president of the European Parliament, Martin Schulz (SPD). While the CDU/CSU emerged from the elections as the strongest party, the process of forming a government is dragging on in the light of the failure of exploratory talks for a coalition between the CDU/CSU, the Greens and the Liberals. Even in the case of a remake of the grand coalition between the CDU/CSU and the SPD, negotiations to find a common ground on European policy, budgetary matters as well as labour and social policy will be not easy.

29 Documents
March 7, 2018
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From the start, the negotiations were ill-fated. To begin with, the SPD leadership rejected a revival of the grand coalition (Groko). Then, the partly diametrically opposed interests of the parties involved, seemingly abundant financial scope and a lack of interest in fundamental reforms on the part of the German population led to a – in many areas – mixed bag of measures which, on balance, aims to further increase governmental control of the business sector and society at the expense of individual freedom. However, at present, the predominant feeling is relief that Germany now has a “decent“ government. But not only the coalition partners may soon wonder whether the price is too high. [more]
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February 8, 2018
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The four-month deadlock following the inconclusive German federal elections was brought closer to its end with the coalition agreement between the CDU/CSU and the SPD. The last hurdle to Merkel's re-election is now the SPD membership ballot which is expected to give its approval, though at a thin margin. The agreement foresees significant investment in infrastructure and education but caters too much to permanent spending on social and pension policy given the largely cyclical nature of the budgetary leeway. Europe is supposed to take centre stage in the would-be coalition's policy – a signal which matters for Martin Schulz but less so for the member ballot and the German voter. The coalition commits itself to the transformation of the ESM and more spending on Europe but the red lines will only emerge when the details will be tabled. Surprisingly, the SPD will hold most of the major portfolios in the cabinet. With the foreign and the finance ministry the SPD got hold on the key portfolios for shaping the European policy course, although the key decisions will still be left to the chancellor. [more]
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February 6, 2018
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The economy continues to steam ahead, with quarterly GDP growth of 0.5% qoq in the winter half. A tight labour market and swelling order books are boosting the union's bargaining power so they are pushing hard for higher wages, although increases might fall short of expectations among workers and the ECB tower. Meanwhile in Berlin, Groko hopefuls are spending Germany's fiscal surpluses, seemingly unconcerned with demographic challenges and the fact that record low interest rates and above potential growth will not last. This party will likely go on for some time - maybe even a few years. However, the situation feels increasingly reminiscent of carnival revellers' popular song "Am Aschermittwoch ist alles vorbei" (It's all over on Ash Wednesday). [more]
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December 15, 2017
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With a growth rate of probably 2.3% in 2017, Germany delivered the main positive surprise in the industrial world. In 2018, German GDP looks set to expand by 2.3% again. If this forecast materialises, Germany will grow at an above-potential rate for the fifth year in a row. The upcoming wage round and resilient demand combined with the global decline in free capacities might, however, push up prices more strongly than currently expected. We already voiced concerns ahead of the Bundestag elections that the new government (just like its predecessor) might not pay sufficient attention to urgent challenges such as digitalisation, demographics and globalisation as the labour market situation is favourable. Now that forming a government has turned out to be unexpectedly difficult our concerns have increased. [more]
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December 12, 2017
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Elections, referenda and politics have held quite a few surprises in the last 1 ½ years. While there is a general feeling among voters that things are moving in the wrong direction – although there are certainly differences of opinion about the direction itself – the outcomes of recent elections and polls have probably done very little to counter their disenchantment. One reason for this frustration is the increasing complexity of political issues. They just cannot be resolved using the simple answers offered by many populists. Voters crave such simple answers, however, as throughout evolution humans have been very successful in reducing complexity by applying heuristics, simple rules drawn from experience. [more]
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November 13, 2017
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Employment in Germany has been rising for years now. However, cyclical tailwinds increasingly hide structural problems, such as tighter regulation and demographic developments. If the labour market is not to become a major obstacle to German growth, the future government will need to take quick and decisive action to counteract existing and imminent imbalances on this key market. Reducing long-term unemployment will require a mix of policy measures. The total number of jobs would probably be significantly lower, if there was no low-wage sector. Integrating refugees and the “mismatch” between the qualifications desired by employers and the qualifications which unemployed people actually possess are major challenges. Which direction is the new German government going to take in labour market policy? [more]
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November 3, 2017
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Envisaged Jamaica coalition: After the exploratory talks is before the negotiations. It would not come as a surprise, if the coalition formation were to take longer than ever before in the Federal Republic and if the chancellor were not until January. Given that in many areas critical details remained unresolved in the first round of the exploratory talks, further challenging rounds will follow in the next few weeks. Only after that will the official coalition talks begin - provided the Greens sound the all-clear at their party convention. The search for compromises is aggravated, as many of the partners’ requests have to remain unfulfilled despite buoyant tax revenues. Initially, i.e. in 2018, the economic impulse of a "black-yellow-green" fiscal policy is likely to be very limited. But steps in the right direction of strengthening Germany are on the horizon. Another positive is the clear commitment to a united and strong Europe. (Also included in this issue: November tax estimate, German current account surplus, trends in the EU industry) [more]
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October 6, 2017
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The view from Berlin: Jamaica unlikely to trigger fundamental policy changes. The total additional fiscal impulse provided by a Jamaica coalition could in our view amount to between EUR 15 bn and EUR 20 bn in 2018. This would be only marginally more than the EUR 15 bn tax cuts "promised" by the outgoing Minister of Finance, which we had already taken into account in our 1.8% GDP forecast for 2018. Proposals in the FDP's election platform to scale back the ESM and to install an orderly EMU exit procedure have raised concerns among some EU politicians. We doubt that these two proposals will make it into the coalition treaty. Despite the FDP's insistence on more market- and rule-based procedure within EMU, it is very unlikely that Germany would not provide the necessary support if another EMU country slipped into acute crisis. (Also included in this issue: Public finances after the election, World trade) [more]
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September 19, 2017
Region:
German Bundestag elections 2017: The winner seems to be clear, but not the next government! According to the ARD Deutschland-trend (14.09.) only a renewed Grand Coalition or a coalition between Merkel‘s CDU/CSU, the liberals (FDP) and the Greens (“Jamaica”) would be arithmetically possible. But given tight polls and their typical error margins other alternatives might become available. We are discussing coalition scenarios and their possible implications for Germany’s economic and EU policies as well as financial markets. [more]
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