Which government does Germany need?

  • Forming a government will prove difficult and will certainly not take place quickly.
  • But this would not be disadvantageous for the German economy. A look at the past shows that the German economy mostly responded very calmly to the results of general elections. Even when government constellations were being formed that were previously unknown.
  • Germany is faced with extremely important questions concerning the future. What’s really needed to develop solutions is a government that has the power to act in accordance with key policy themes and not party interests. Yet the prospects of the Jamaica coalition fulfilling these requirements do not look all that good.
  • Indeed, a government is now needed that is able to tackle these future challenges with a clear vision and work towards achieving solutions. This would make Germany more attractive as a place to do business and leverage growth potentials in the medium term.

 

Forming a government could prove a difficult task. Everything is pointing to a „Jamaica coalition“ of CDU/CSU, the FDP and the Greens; however, the policy overlaps of the potential partners are not all that great. The forthcoming negotiations will therefore be difficult, not only in terms of policy; the climate of discussion especially between the CSU and the Greens can also be described as rather burdened. Furthermore, the state parliamentary elections are due to be held in Lower Saxony on 15 October. Before this date, it is very unlikely that coalition talks will be held with any serious policy contents.

Thus, even if agreement can be finally achieved on a Jamaica coalition, we can still expect it to take longer to form a government which also implies a protracted phase of uncertainty. A conclusion is unlikely to be reached before Christmas. But would that be such a bad thing?

A look at the past shows that the German economy mostly responded very calmly to the results of general elections. Even when government constellations were being formed that were previously unknown. There is no reason why this should be any different this time. The ifo index will not enter a nosedive and the good economic development will not be interrupted just because it takes longer to form a government or because of the previous lack of experience with a Jamaica alliance, at least at the federal level. The current government will remain in office, with few likely to notice any difference compared with the preceding months.

And once the new government has been formed, this will also have little influence – at least in the short term – on the economic development in Germany. Due to the greatly differing party programmes, it is very likely that the common denominator – if it can be found – will be quite small. This means that few major advances are likely to be achieved by the new government.

In the longer term, this naturally poses a great problem. The most important questions of the future, such as dealing with the effects of demographic change on the pension and healthcare system, the development of a fair and quality-based education system, managing migration and integration as well as mastering digitization require a government with the power to act and which is able to focus on key policy themes and not be distracted by party interests.

Yet the prospects of the Jamaica coalition fulfilling these requirements do not look all that good. Indeed, a government is now needed that is able to tackle these future challenges with a clear vision and work towards achieving solutions. This would make Germany more attractive as a place to do business and leverage growth potentials in the medium term.

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