German Election Update: Advantage Scholz German Election Update: Advantage Scholz German Election Update: Advantage Scholz

German Election Update: Advantage Scholz

Macro
Christopher Dembik

Head of Macroeconomic Research

Summary:  Last night's first TV debate between the three lead candidates (Spitzenkandidaten, in German) have confirmed the current momentum in German election campaign. The SPD is on the rise, overtaking the Greens in most polls, while the CDU/CSU continues its fall from grace. The race is more open than ever. We think the next government will be a three-party coalition led either by the centre-right CDU/CSU or the centre-left SPD. A Green chancellor is a remote possibility, in our view. In terms of economic implications, we expect German fiscal policy to turn modestly more expansionary after the election. But a reform of the debt brake introduced in 2009 following the Global Financial Crisis is unlikely.


Advantage Scholz : SPD’s Olaf Scholz is the clear winner of yesterday’s TV debate. According to a Forsal opinion poll released just after the debate, 36% of viewers said Scholz had « all in all won » against 30% for the Green candidate Annalena Baerbock and only 25% for CDU/CSU candidate Armin Laschet.  The audience’s decision on the question « Who do you most likely trust to lead the country ? » was even clearer. Here 47% voted for Scholz, 24% for Laschet and 20% for Annalena. The result of the question « Who did they find the most likable » was similar. Scholz confirms its status of most popular candidate (38%) while Laschet collects the fewest sympathy points (22%). For many voters, Scholz has emerged in recent weeks as the only obvious successor to chancellor Angela Merkel. In contrast to Laschet and Baerbock, he has not make any personal mistakes since SPD delegates overwhelmingly voted for him as candidate for the September election in past May. In addition, he showed strong leadership during the flood crisis. It obviously leaves its marks on the SDP’s performance in the polls (see the below chart).

« Jamaica » or « Traffic light »? The risk of an inconclusive election result with no clear winner is increasing as we are getting close to election day. The only certainty is the next governement will be a three-party coalition. There are two main coalition options : a Jamaica coalition (CDU/CSU, Free democratic party and Greens) and a Traffic light coalition (SDP, Greens and Free democratic party). The Greens and the pro-business Free democratic party will be the kingmakers in this election. The Greens are traditionally politically closer to the SDP, while the Free democratic party is closer to the CDU/CSU. But nothing is set in stone. The continuity of the grand coalition, which has governed Germany in recent years, is unlikely in our view. A majority of voters reject this option in recent polls. Expect long and intense negotiations to form the next governement. Outgoing chancellor Merkel could still be in the office in year-end.

A slightly more expansionary fiscal policy: No matter the outcome, we don’t expect a fiscal revolution in Germany after the election. The need to form a three-party coalition implies important concessions will be made. The risk is the next government will achieve little. Our baseline is Germany’s fiscal policy will be modestly more expansionary in the coming years to focus on green investment, especially if the Greens are part of the coalition government – which is probable based on current polls. A dedicated green investment fund could be created. But the introduction of a wealth tax is not a done-deal, for instance. A reform of the debt brake, which limits the Federal Government’s structural net borrowing to 0.35% of gross domestic product, is unlikely since it would require constitutional amendments. But a more gradual re-introduction could be a possibility.

What to watch now: Besides the polls, we are focused on the upcoming TV debates on 12 and 19 September. It is still early days. The main candidates are neck-to-neck. The two debates left can change the dynamics of the race.

Quarterly Outlook 2024 Q3

Sandcastle economics

01 / 05

  • Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article
  • Bonds: What to do until inflation stabilises

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

    Read article
  • Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

    Read article
  • FX: Risk-on currencies to surge against havens

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

    Read article
  • Commodities: Energy and grains in focus as metals pause

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

    Read article

Disclaimer

The Saxo Group entities each provide execution-only service, and access to analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Inspiration Disclaimer and (v) Notices applying to Trade Inspiration, Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular, no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Trading in financial instruments carries risk, and may not be suitable for you. Past performance is not indicative of future performance. Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/en-sg/legal/disclaimer/saxo-disclaimer)

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Markets or its affiliates.

Saxo Markets
88 Market Street
CapitaSpring #31-01
Singapore 048948

Contact Saxo

Select region

Singapore
Singapore

Saxo Capital Markets Pte Ltd ('Saxo Markets') is a company authorised and regulated by the Monetary Authority of Singapore (MAS) [Co. Reg. No.: 200601141M ] and is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms & Risk Warning to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products such as Margin FX products may result in your losses exceeding your initial deposits. Saxo Markets does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Markets does not take into account an individual’s needs, objectives or financial situation.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-sg/about-us/awards.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website are not intended for residents of the United States, Malaysia and Japan. Please click here to view our full disclaimer.

This advertisement has not been reviewed by the Monetary Authority of Singapore.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.