The most prominent main indicators of Germany, the IFO index, only implies that the next government cannot rely on any cycle puller wind. Coming at 85.2 In February, from 85.1 in January, the IFO index showed that the German economy was still in stagnation. The current assessment component is significantly weakening (from 86.0 in January to 85.0 in February), while expectations are rather increased.
German economic problems must be famous now. In the short term, the possibility of US tariffs and increase in energy prices must continue to consider economic activities. At the same time, new geopolitical tensions and changing US government attitudes about defense and security in Europe tend to burden consumer expenses. This is why all eyes will now be in the upcoming coalition discussion, hoping for some breakthroughs and at least the encouragement of self -confidence.
Coalition choice into one
As it is currently established, other large coalitions seem to be one -the choice of a proper government, although there are significant differences in tax, energy, investment, and financing policies. Following the results of the worst election, SPD is not possible to easily join the government coalition as a junior partner for CDU/CSU. This party is likely to enter a new era of political leadership and face other existential crises. Any coalition agreement is likely to make the sound of the SPD grass root. However, SPD will eventually admit, because the large coalition remains a decent choice for CDU/CSU to form government. The only alternative is a coalition with AFD, a scenario that was ruled out by Friedrich Merz.
What can be given by the next government realistically?
The rise of the large coalition can bring some tax deductions for households and companies without slaughtering in social expenditure, as well as some deregulation. This might also approve investment in infrastructure and defense, either through special destination vehicles or changes to debt brakes. Germany may support European efforts to fund defense and infrastructure defense. However, significant reforms, such as changes in the pension system, seem very impossible. In addition, achieving lower and more stable energy prices should not be accepted.
The biggest challenge is to finance every new plan. During the campaign, CDU/CSU presented a significant planned funding plan. However, it is always suspected that CDU/CSU will divert his attitude to the debt brake after the election. With the left and green, now there are majority 2/3 in parliament for direct change in debt brakes, although the left people will not support such debate to increase defense expenditure. There is a narrow window to reform debt brakes using the next 30 days, where the current parliament is still there, to secure SPD, green, and CDU sounds for debt brake changes.
Some increases in cycles without wirtschatswunder 3.0
German voters will get what they want the most: gentle and gentle changes but no disturbance. Some recovery of the cycle without approaching Wirtschatswunder 3.0. In fact, the biggest risk next to only delay the past reform is further reinforcement of the right and left wing (as happened every time the CDU/CSU and SPd are in the coalition). Therefore, many successful government success will depend on the willingness of each party and politicians to make personal and party interests behind and focus on issuing an economy from its structural stagnation. This will also need to leave some political holy cows.
This is a decent scenario if the main motivation of such a coalition is to prevent AFD from winning the next election – the scenario that might occur if the next government is unsuccessful. In this case, a tighter immigration rule is a more likely result than an agreement on improving the German economic business model. Unless the next government really reads the signs of the times.
Source: Ing
