German Elections A new impulse for Europe?

14 September 2017 | Tags: Germany, Politics, Europe

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Topic of the week: Inflation

    We have all seen the outrageous transfer fees that have been paid for footballers, such as Dembélé, Mbappé, and Neymar. We are all also very much aware of the ever-increasing cost of a scoop of ice cream, or a simple avocado toast (many hipsters can relate to this). Inflation seems to be everywhere at the moment!

    This is why we have dug deeper into this topic this week. Together with the EPFL Social Media Lab, we analyzed more than 36 thousand tweets and 13 thousand online articles. It quickly became apparent that inflation is a concern for the future, not one for the present. How does this tie in with the German elections? Well, a victory for either Merkel or Schulz is not going to fundamentally change short-term inflation expectations…

    The ECB, which met twice in the past two months, has done little to increase interest rates. This has been felt especially keenly by German investors, who are feeling the brunt of more 'normal' inflation.

    Every week, together with the EPFL Social media lab, we explore what's on people's minds in Germany by making use of artificial intelligence techniques to analyze opinions in real-time. Our Chief Investment Officer for Germany, Max Kunkel, discusses these key election topics and what they mean for investors.

    "Despite criticism, the #ECB keeps interest rates at 0%."

    Germany, a country of savers, is somewhat ill-equipped to deal with a more 'normal' inflation rate. Most investors hold fixed income nominal assets, with just 10% of households owning equities.

    Interestingly, inflation statistics are not a hot topic among social media enthusiasts. But price changes with regards to their favorite soda are...

    The Germans are well aware of their financial environment. They know how to gain from the current situation (low interest rates incentivize people to take on loans); but equally they fear risks.

    We'll be keeping investors up to speed as to the ins and outs of the German elections over the days ahead. Stay tuned.

    Despite criticism, the #ECB keeps interest rates at 0%.


     

    You draw it

    How did Merkel do?

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    German Election Watch for investors

    Our most important research

    German Election Watch for investors

    Recent opinion polls suggest an 85% chance for Merkel to retain the chancellery.

    Multiple coalition scenarios imply different economic consequences for Germany as well as partly opposing consequences for European integration, which is expected to accelerate in the coming years.

    That said, potential coalition partners may seek the finance minister's post, which could affect the stance on the Eurozone periphery as well as the choice of the ECB president in 2019.

    The latest polling still suggests a 75% probability of Merkel retaining the chancellery. But the odds of a grand coalition are markedly lower (60%) given several coalition options.

    The polls suggest a marked shift to the right of the political spectrum by voters since the last election, with the FDP arguing for a Greek exit from the euro.

    So the German election outcome will likely have an impact on Greece's planned bailout exit next summer.

    Recent opinion polls suggest increased uncertainty in the aftermath of the 24 September elections, as the CDU/CSU (expected to capture most votes) may be able to form a coalition with either the FDP or Greens given their rise in recent months.

    Multiple coalition scenarios imply different economic consequences for Germany as well as partly opposing consequences for European integration.

    What is more, potential coalition partners may seek the finance minister's post, which could affect the stance on the Eurozone periphery as well as the choice of the ECB president in 2019.