Possible new Groko – political stability would come at high costs
At the turn of the year 2017/18 Germany is in an unprecedented political
situation. Within the past three months since the federal election the major
political parties could not manage to form a new government coalition. Thus, the
New Year will still see the caretaker government in office.
However, there is
evidence to suggest that a renewed grand coalition (Groko) or a minority
government tolerated by the SPD could be established by late-spring. Yet, the
SPD has still difficulty in participating in a new government, given the party
leaders’ repeated determined refusal of a renewed GroKo in first two months
after the federal election on September 24. Their concerns have remained
despite the Federal President’s intervention. End-November, in the aftermath of
the breakdown of the talks on a Jamaica coalition (between the CDU/CSU, the
Greens and the FDP), President Steinmeier summoned the leaders of the CDU,
the CSU and the SPD to remind them of their responsibility to hammer out a
stable government.
Meanwhile, on December 7, an SPD convention has
greenlighted exploratory talks with the CDU/CSU. But there are still substantial
obstacles for the formation of a new government. Thus, new elections could
become a topic on Germany’s political agenda for 2018. Anyway, in next few
months we expect ongoing political uncertainty and noise which could
negatively impact the markets.
EU Forecast
euf:ba18h:113/nws-01