The German elections, which will take place on Sunday, September 26, will be one of the most influential developments in terms of the future economy in terms of the EUR. The elections, in which Merkel will not be a candidate and the incumbent Chancellor will not seek a chance for the new term for the first time after the war period, may also bring about changes in the shape of a new era, trade and budget surplus approaches in the post-Covid era, and the size of government / social spending. In this respect, a liberal or left-wing coalition or grand coalition options will produce different results.
Debt brake (Debt brake, Schuldenbremse) is the balanced budget practice used by the German federal government since 2009. This is a practice that came into play after a period that greatly increased the expenditures aimed at eliminating the economic imbalance between the two Germany, such as the construction and financing of the communist East Germany in the reunification in 1990, and thus increased the borrowing (the economic imbalance continues even today). We can also include the economic integration effect of the transition from Deutsche Mark to EUR in the 2000s. According to the Maastricht Criteria, the debt/GDP ratio of member countries should not exceed 60%. The budget deficit/GDP ratios of the member states should not be over 3%. Structural deficits are also prohibited for states for the post-2020 period, with the exception of natural disasters or strong recessions, according to debt brake. In the last 2 years, Germany has faced factors such as the recession due to Covid, as well as domestic floods and natural disasters. Germany has had a budget surplus since 2012, reducing its debt-to-GDP ratio.
There may also be some cyclical and structural changes in Germany’s trade surplus policy. Because the period after Trump and Covid has been negative in terms of global trade volume. At the same time, Far East actors, especially China, which increase exports, steal the global trade shares of Western economies. The most important advantage is low labor cost and technology transfer. Good know-how transfer allows them to sell at lower prices by combining the use of this technology with their own low labor costs. Same quality, lower price..
Besides these; climate change policies are now more important than before. The major floods in Europe in July brought the climate issue back to the fore. 73% of Germans think that the government is not working enough on this issue, which is a situation that reduces support for the CDU/CSU (Christian Union, ruling party). The situation reflected in the surveys; That the SPD (Social Democrats) is ahead. CDU/CSU leader Laschet was caught laughing on camera during the floods in July, causing serious injuries in the polls and putting the SPD in the clear lead. The Greens can come forward in the coalition options. Probably because these two parties will not be able to obtain a majority, a third partner should be added. The classical liberal party FDP is one of the possible alternatives for partnership (“Traffic Light Coalition” because of the colors of these coalition parties). While the SPD and the Greens want to impose more taxes on the rich and corporations, they also advocate a transition to a green economy. Liberals are against the former and supportive for the latter.
In the Jamaican coalition option, consisting of the CDU/CSU, the Greens and the FDP, which had an unsuccessful attempt to establish itself in the 2017 elections, there does not seem to be a very solid possibility due to the fact that they are in the minority. This coalition model follows a predominantly conservative policy, but the tandem of the Greens and the FDP does not quite overlap. Again, they will differ on taxes and expenditures. The grand coalition of SPD and CDU/CSU, or the option of adding the Greens in terms of majority arithmetic, again leads to the addition of a concept based on public investments, green economy and social aids to the economy model. The main problem here is to disable the debt brake mechanism. Of course, the two major parties SPD and CDU/CSU have their own concerns about their bases to be reckoned with. Democratic socialist Linke will again be a party to corporate taxes, taxes on wealth, and social benefits. It is not considered an alternative by right-wing parties, but if it joins a coalition with the SPD and the Greens, the tandance will shift too far to the left. However, there would be a coalition that would reduce the balanced budget approach and increase spending. The right-wing populist AfD is by no means an alternative and could possibly reduce some of the votes it exploded in last election because of the immigration issue.
A coalition dominated by conservative parties will mean the continuation of the balanced budget; a social democratic and left-leaning coalition would mean more wealth taxes, green investments and spending, and increased consumption.
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