If Mr. Schulz were the German Chancellor – a softer approach would be taken in some areas

The EU Parliament’s former President Martin Schulz is to be the Social Democrats’ (SPD) chancellor candidate for the general election in the autumn of this year. Now that we know who will be challenging Chancellor Merkel (Christian Democrats, CDU), it is worth taking a look at the SPD candidate’s positioning particularly with regard to financial market themes.

Martin Schulz has been a member of the European Parliament for more than 20 years and his statements until now have therefore focussed primarily on European policy issues. He is known to advocate reform of the European stability pact, and considers the Maastricht criteria in particular to be outdated. For the deficit calculation, he believes that a distinction should be made between state consumption expenditure and investment. He is also of the opinion that the euro stability pact should be complemented by a social stability pact aimed at safeguarding the people in the euro member states without actually specifying what form this would take. Schulz’s critical position on the stability pact is also reflected in his recent statements. According to media reports, Schulz has signalled EU parliament members from Spain and Portugal the prospect of a „soft“ approach to applying the stability pact. He also believed that there was justification for France’s recent violation of the budget deficit limit. Moreover, Schulz views the ECB’s current bond purchasing programme in a positive light. In his opinion, the measures adopted by the ECB will generate further stability, restore confidence and create calm in the Eurozone. He believes this to be a pre-condition for generating more growth again. Thus, with Martin Schulz as Chancellor, the debate over the mutualisation of state debt at the European level could be revived again.

The latest opinion polls appear to suggest, however, that Martin Schulz will have a hard time even becoming the ninth Chancellor of the Federal Republic of Germany. Until now, the SPD chancellor candidate has not made any clear coalition statement. To become the chancellor, however, he could envisage an alliance between the SPD, the Greens and the FDP, or between the SPD and the Left. At the moment, the SPD would pool around 20% of the votes. The Greens and the Left are neck and neck with 9% of the votes, while the FDP is still struggling to clear the 5% hurdle. Martin Schulz ought really to be hoping that the FDP will again fail to make it into the German Bundestag. This could be an opportunity for him, as it would mean fewer votes necessary for an absolute majority in the Bundestag. If the FDP were to gain, for example, only 4.9% and the other parties around 5% of the votes as signalled in the latest opinion polls, the majority in the Bundestag would only lie at 40.1% which would at least clear the path for a Red-Red-Green coalition with Schulz as Chancellor.

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