From the German perspective, the first quarter of 2018 will be dominated by the
formation of the new government and the wage negotiations in metal and
electrical engineering industry (in progress), the public sector and construction
industry (both start this month).
Both events should at least not have a growth-
dampening effect in the short term and could even further strengthen the cycle.
In the current grand coalition negotiations, however, Germany’s competitiveness
is, at best, being treated indirectly, for instance in infrastructure investment
plans. More directly, companies in Germany will be burdened by the adverse
effects of rising health insurance contributions and further labour market
regulation, whilst, at the same time, massive corporate tax cuts on the other side
of the Atlantic are luring foreign direct investment.