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24 September 2003

EZA 557 - Germany - Politics




Bavarian election win for Stoiber/CSU holds plus points for Schröder and SPD reform program
The Bavarian state elections on Sep. 21 were won by incumbent Bavarian Prime Minister Edmund Stoiber with ease. Stoiber’s conservative CSU party took 61% of the vote against the centre left SPD’s 20%. This was biggest margin in Bavaria ever against the SPD, the party of the ruling federal government of Chancellor Gerhard Schröder. Paradoxically the win will reinforce Schröder’s Agenda 2010 reform program. The connection between record unemployment levels and the ability to be elected is clear even to the left who will have to give Schröder greater room for manoeuvre. Meanwhile Schröder lacking control of the Bundesrat, the upper house, has been forced into what is effectively a grand coalition with the CDU/CSU opposition effectively meaning his reform agenda survives only on their terms. However, inter-party rivalry between Stoiber, CDU Head Angela Merkel and Roland Koch, Hesse Prime Minister will complicate and delay the reform process. Some issues such as cutting unemployment benefit will go ahead but others, such as tax reform, will be caught up in sniping between different camps within the CDU/CSU opposition.

SummaryAsset Conclusions: CSU win mildly positive for stock market, mildly negative for bonds, as budget balancing more difficult, general impact to be muted.

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© Graham Bishop

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