EZA 699: Germany Politics - Election Update

12 September 2005

German elections: ground hog day?
Growing recovery momentum for the SPD in the polls during the last weeks provides an eerie reminder of chancellor Schröder’s narrow 2002 election victory. But with the SPD still trailing the CDU by 7% in 08Sep polls, a grand coalition, led by Angela Merkel, now seems the most likely option after the 18 Sep elections. A (market friendly) majority for a CDU-FDP coalition cannot be ruled out, given the CDU’s solid lead, but its likelihood has fallen to no more than 50/50. Grand coalition would likely provide only modest progress on tax reform and stall health care reform and a further liberalisation of the labour market.

SummaryAsset conclusions: only speculative investors might increase their weight in German assets, given strong DAX performance and political downside due to the elections.

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© Graham Bishop