CONTENT PREVIEW
Country Risk

Renewal of centrist German “grand coalition” government indicates wide-reaching policy continuity and increase in public spending

15 March 2018
German Chancellor Angela Merkel takes her oath to serve her fourth term as chancellor with German President Frank-Walter Steinmeier, 14 March 2018, Berlin. Source: Michele Tantussi/Getty Images

Key Points

  • The re-establishment of the ruling coalition between the Christian Democratic Union (Christlich Demokratische Union Deutschlands: CDU), Christian Social Union (Christlich-Soziale Union: CSU), and Social Democratic Party (Sozialdemokratische Partei Deutschlands: SPD) indicates a large degree of policy continuity and a stable investment environment. Still, despite having experience in pragmatic and effective collaboration, the CDU, CSU, and SPD are bound to continue to disagree on issues such as migration, security, and health care.
  • All the coalition partners are seeking to renew themselves after suffering historically low results in the general election by sharpening their future policy profiles. This differentiation is likely to challenge government cohesion and stability slightly in the 12-month outlook.
  • Germany’s strong economy and the current budget surplus will facilitate the new government’s plans to increase public spending while refraining from introducing higher taxes.

Event

Following the general election in September 2017 and a difficult subsequent government formation process, German Chancellor Angela Merkel was sworn in yesterday (14 March) for her fourth term in office.

German Chancellor Angela Merkel was sworn in yesterday (14 March) for her fourth term in office following the general election in September 2017 and the subsequent challenging government formation process. Merkel received 364 out of 709 votes in the German parliament’s first round of voting, renewing the so-called “grand coalition” between her centre-right Christian Democratic Union (Christlich Demokratische Union Deutschlands: CDU), its Bavarian regional affiliate the Christian Social Union (Christlich-Soziale Union: CSU), and the centre-left Social Democratic Party (Sozialdemokratische Partei Deutschlands: SPD). Merkel was supported by nine more parliamentarians than needed to gain an absolute majority.

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