Tuesday, 21 Sep 2021

Germany braced for months of mayhem as ‘no government to replace Merkel before 2022’

Angela Merkel heckled during speech in German Bundestag

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Germans will head to the polls on Sunday, September 26, to elect Angela Merkel’s successor after 16 years in power. Polls are placing SPD leader Olaf Scholz in the lead so far, ahead of CDU leader Armin Laschet. But regardless of who will win the top spot, coalition talks between the parties will have to take place after the election results in order to form a government.

Economist Dr Lars Feld claimed he does not expect talks to end before December.

He told Express.co.uk: “It will take some time until they finally come up with a government.

“I think that the coalition negotiations between the parties will take quite some time.

“I don’t expect a new government in Germany before December.”

The delay in Germany to form a government would also have implications at EU level, Dr Feld said.

Southern states led by Italy are calling for permanent changes to the EU’s fiscal rules, something that has already been strongly opposed by northern EU states.

Austria, Denmark, Latvia, Slovakia, the Czech Republic, Finland, the Netherlands and Sweden have crushed the EU and Italy’s dreams of loosening the bloc’s deficit rules. Ahead of an informal gathering of their peers in Slovenia this Saturday, the countries issued a document to the bloc.

A one-page document signed by their finance ministers read: “Reducing excessive debt ratios has to remain a common goal.

“The [EU] Treaty … obliges all Member States to avoid and correct excessive deficits.”

This is set to be a major blow for France, Italy and Spain who have all said the rules should be adapted to post-pandemic realities and climate change.

Under the EU’s Stability and Growth Pact (SGP), it caps budget deficits at three percent of economic output.

It also limits public debt to 60 percent, according to Politico.

However, the framework has been widely critcised as it allows Brussels to bend the rules and avoid fining anyone from straying from the benchmarks.

The already heated debate tabled by Italian Prime Minister Mario Draghi and backed by EU Commissioner Paolo Gentiloni, is expected to go on for some time as both Germany and France – the two countries whose voice will be decisional on the matter – have elections in the next seven months.

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Dr Feld continued: “[A delayed German government] would also mean that the window of opportunity for the Commission to manage a kind of consensus in advance for a reform of the fiscal rule, which is very important, will be between February and March 2022.

“There are not much more possibilities than that.

“Then you are catapulted in the election campaign for the presidential vote in France, which will again change things.”

He added: “France and Germany are somewhere in the middle of these discussions.

“President Macron cannot afford to endorse a reform of the fiscal rules that leaves them in a relatively strong binding situation.

“If he does, he will be vulnerable to attacks by an independent.

“So it’s better for him not to have any reform before the presidential election.”

Despite the political turmoil expected to create chaos in Germany and the EU, Dr Feld argued, however, that political uncertainty will no affect Germany’s economic recovery.

The optimistic economist claimed his country could reach 2019 GDP levels by the end of the year, regardless of the formation of a new government.

He said: “I think in the course of the next two or three months we will arrive at a level of GDP that we had in 2019.

“It’s either going to be by the end of this year, or if the value chain still has problems, perhaps the beginning of next year, but that is already a more pessimistic view.”

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