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Germany in political crisis as coalition talks fail
November 20, 2017 / 7:54 AM / a month ago

Germany in political crisis as coalition talks fail

BERLIN (Reuters) - Chancellor Angela Merkel said on Monday her efforts to form a three-way coalition government had failed, thrusting Germany into a political crisis and pushing Europe’s largest economy closer to a possible new election.

Below are analysts’ reactions to the collapse of talks:

HOLGER SCHMIEDING, BERENBERG BANK:

”For Germany, this is a significant political upset. The consequences should be very limited, though. The economy is in such good shape ... Businesses will not curtail investment growth by much, growth can rumble even in a political limbo.

“Due to Germany’s specific history with the unstable Weimar republic, Germans don’t value minority governments and repeat elections. Still, repeat elections in early 2018 are now an option. The pressure on the major parties to form a stable arrangement will be immense in coming days.”

MARCEL FRATZSCHER, PRESIDENT OF DIW GERMAN INSTITUTE FOR ECONOMIC RESEARCH

“The exploratory talks between the Jamaica parties have not delivered a result despite having had Germany on tenterhooks for weeks. That’s not so surprising, because the process was no more than drawing red lines and looking for the lowest common denominator. Things aren’t completely over, hopefully. The Jamaica parties must try a new start, since they all know they don’t stand to benefit from fresh elections.”

JOERG KRAEMER, COMMERZBANK CHIEF ECONOMIST

“Uncertainty is poison for the economy. But the collapse of the Jamaica exploratory talks can hardly be a shock for businesses after four agonising weeks of negotiations. Furthermore, the German economy is currently in robust shape. Competitiveness is still high and the ECB’s loose monetary policy is stimulating demand. The economy has so much dynamism that the many problems - from bad roads to slow internet - won’t even be noticeable for the time being. I continue to expect growth of 2 point something this year.”

THOMAS ALTMANN, PORTFOLIO MANAGER AT QC PARTNERS

“For the markets, it’s time for a hangover instead of a year-end rally. Uncertainty is now greater than after the elections ... Fresh elections are currently the biggest risk factor, including for the markets. Furthermore, nobody knows how repeat elections would go. Germany could be politically paralysed for a long time. That’s bad news, not just for Germany but for the whole euro zone and the whole of the EU.”

Writing by Paul Carrel; Editing by Alison Williams

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