German business leaders react to SPD victory

People in Germany awoke Monday to the news that the country's center-left Social Democratic (SPD) party had pulled off a narrow victory over the incumbent conservative bloc of CDU/CSU. Reactions from the world of finance and economy poured in, despite the fact that the final makeup of Germany's next coalition government could still be months away.

Several powerful business associations, a powerful interest group in Germany, were united in their calls for politicians to be swift in forming a government.

"We need, as quickly as possible, a coalition for climate protection and for the energy transition," said Kerstin Andreae, president of the BDEW, Germany's business organization for the energy and water industry.

No time for games

"Germany as a business location cannot tolerate coalition negotiations taking place at a snail's pace once again under the current economic conditions," said Markus Jerger, federal managing director of the German Association of Small- and Medium-Sized Businesses (BVMW).

After the 2017 election, it took months for Chancellor Angela Merkel's conservatives and the SPD to agree on an updated version of their coalition government. It wasn't until six months after the election that Merkel was confirmed again as chancellor.

"In view of the unclear election result, German industry now expects all political parties to take maximum responsibility and address the priorities, and to not engage in tactical maneuvering," was the similar statement from the president of the Federation of German Industries (BDI), Siegfried Russwurm.

The Green Party and the neoliberal Free Democratic Party (FDP) are considered kingmakers in this election. After the federal vote in 2017, the FDP pulled out of talks for a coalition with the Greens and the CDU/CSU, causing the talks to collapse and leading to Merkel's party teaming up with the SPD.

Left's losses calm markets

The distribution of votes leaves room for several coalition options, though steep losses suffered by the far-left Die Linke party exclude the much-discussed possibility of a government with a strong left-leaning bent. This appeared to have a moderate positive effect on investor sentiment: the DAX, Germany's blue-chip stock index, opened Monday with clear gains as markets were bolstered by the prospect of no drastic changes to come out of the world's fourth-largest economy.

"From a market perspective, it should be good news that a left-wing coalition is mathematically impossible, and consequently has been eliminated as a threat to the negotiations between the SPD, CDU, Greens and FDP," said Jens-Oliver Niklasch, economist at German bank LBBW. "The remaining possible governing parties do not differ so greatly on economic and financial policy issues as to make compromises impossible."

These sentiments were echoed by experts at Commerzbank, the Kiel Institute for the World Economy (IfW) and other organizations dedicated to finance and the economy.

A long to-do list

Like business leaders, economists also called on politicians to quickly settle on the next government and move on to setting a policy agenda.

The US-China conflict, a post-Brexit UK, and the need to create a stronger EU are all factors that demand strong leadership out of Germany in the years to come, said Deutsche Bank chief economist David Folkerts-Landau.

"This new role, which many international observers have long called for from Germany, comes at a time when the country's economic position is under threat from unfavorable demographic trends, structural upheavals resulting from digitalization and, above all, the major challenge of achieving climate neutrality in the next two decades," he said.