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Merkel’s Conservatives currently face major problems.
Merkel’s Conservatives currently face major problems. Approval rates are in free fall as trust in the government’s crisis management has eroded. The CDU/CSU is polling at pre-crisis levels of below 30% fuelling speculation that not only Merkel but the Conservatives in total might not be part of the next government. The announcement of their chancellor candidate is unlikely to turn the tide for the Conservatives. A bold election manifesto on how to bring Germany forward after the deficiencies revealed by the crisis combined with convincing core personal are needed. Coalition options are back in focus with the Greens being the kingmakers in all scenarios. The political talk of the day is a Green-led traffic light coalition also at the federal level. Still, a conservative-green government remains our baseline scenario, but it is not a foregone conclusion anymore. [more]
In case of a snap election in Germany, a CDU/CSU-Greens coalition could be an option. Given both camps' radically different political positions in many areas, such a coalition would require both to make significant compromises. [more]
The recession in German industry can be traced to the massive slowdown of global trade in 2018. Will the German service sector withstand the recession in industry, as some recent survey data seems to suggest? We doubt it. [more]
Given much weaker than expected January business surveys and in particular the slump in their more forward-looking components we are now expecting the German economy to contract again in Q1 2019. [more]
The 0.2% qoq drop in Q3 GDP was, of course, largely due to the WLTP effect, but underlying growth has also clearly slowed in 2018. After mustering 1.6% in 2018, we expect German GDP to expand by 1.3% in 2019. [more]
The month of June was marked by various political irritations which of course also had a certain impact on economies and markets. The US-EU trade conflicts seems set to broaden beyond steel and aluminium. [more]