22 February 2013

Deutsche Bank: Germans like neither the present coalition nor fundamental political changes

With about half a year to go before the federal election on September 22, the outcome is still wide open. In most of the recent polls the government parties CDU/CSU and FDP as well as the opposition parties SPD and Greens have gained support, as smaller parties have lost ground.

The CDU continues to benefit from Chancellor Merkel’s popularity. The skilful management of the euro crisis, which has also diverted attention from her government’s poor performance in domestic politics, is primarily attributed to her. Mrs Merkel’s approval rates are still extraordinarily high (up to 61 per cent), much higher than the rates of the SPD’s chancellor candidate Peer Steinbrück. Additionally, the relatively good performance of the German economy, and especially the labour market, should boost the government parties. There is no mood for a political change.

The FDP, for example, rejects the CDU’s plans to introduce a broad net of industry-specific minimum wages or to supplement the pensions of low-wage earners. The FDP has already reluctantly agreed to the latest social policy act, the introduction of specific childcare subsidies for mothers who look after their little children at home.

In contrast to the FDP’s more market-orientated policy approach, Chancellor Merkel’s party is trying to co-opt some of the opposition’s major social policy topics. Thus the CDU hopes (i) to take the wind out of the SPD’s and the Greens’ sails and (ii) to open the doors towards these parties as potential partners for a new coalition after September 22. The CDU/CSU also advocates an FTT, officially so as to collect a contribution from the financial industry to the public budgets to partly compensate for the heavy losses of economic welfare and tax revenue caused by the financial crisis.

The more the CDU/CSU co-opts the opposition parties’ topics, the more it runs the risk of alienating its traditional voters in the conservative camp and the business community. And it is up in the air whether the CDU will be able to attract enough new voters from other camps like the urban population, instead. The SPD frequently accuses the CDU of offering only half-hearted solutions to (presumed) social problems like old-age poverty. In contrast to the CDU, the SPD often favours deeper and more expensive state interventions.

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© Deutsche Bank