German economy – still no revolution

Teaser: The general election to the German parliament will take place on the 26th of September, though this time, Chancellor Angela Merkel is not running for re-election. Will it make a significant difference to Germany's economic policy in the future?

- Peter Lundgreen

The otherwise politically stable Germany has experienced a spring where the compass now indicates major changes after the parliamentary elections on the 26th of September. I assess the fluctuations as a sign of an election campaign in the next two months, where an unusually large proportion of the voters will remain uncertain about which party to finally support.

For the investors who really want to dive into the upcoming German parliamentary elections, this week has already offered a new development. Christian Lindner, leader of the Liberal Party FDP (Freie Demokratische Partei/ Freie Demokraten), has declared that he will run for the post as finance minister if the FDP were to join a coalition government consisting of the current governing party, CDU/CSU and the Green Party, and of course, the FDP. With this bid for the Ministry of Finance, the political fronts are suddenly being sharpened.

The Green Party’s election program is extensive, but concerning the overall economic and fiscal policy side, they argue for tax increases, increasing the fiscal deficit and promoting all forms of renewable energy and green investments. The FDP, on the other hand, is against tax increases and wants to reconsider how public spending should be used, where they, for example, rate IT infrastructure investments somewhat higher than investments in renewable energy. In my view, this political battle will be interesting for investors to follow as I trust this will determine whether the FDP can win voters, enough to make them needed in the forthcoming governing coalition or not.