reporter2
28-09-21, 12:17
Germany's Chancellor-in-waiting wants to form pragmatic government
Sep 28, 2021
London
GERMANY'S Finance Minister Olaf Scholz, the man widely expected to take over from Angela Merkel as the country's next Chancellor, will have to deal with a host of economic and geopolitical challenges when he assumes the top job.
The 63-year-old, who is also the vice-chancellor, is poised to form a new government after leading the Social Democratic Party (SPD) to a slim victory in the parliamentary elections last Sunday.
A rise in the German stock market and a steady euro following the vote, however, indicate that investors believe Mr Scholz will lead a relatively stable three-party coalition of the SPD, the Green Party, and the liberal business-friendly Free Democratic Party (FDP).
The SPD won 25.7 per cent of the vote, while Mrs Merkel's centre-right Christian Democratic Union (CDU) managed 24.1 per cent. The Green Party scooped up 14.8 per cent, and the FDP received 11.5 per cent.
Mr Scholz, a lifelong member of the SPD, described the result as "a very clear mandate to ensure that we put together a good, pragmatic government for Germany".
Many German commentators believe that there will be much horse trading as the SPD now holds only 206 seats - or 28 per cent - in parliament.
The next biggest proportion is the CDU and Christian Social Union (CSU) alliance that have a total of 196 seats, or 26.7 per cent. The Green Party, with 16 per cent of the seats, and the FDP with 12.5 per cent, are the main dealmakers.
But the right-wing Alternative for Germany (AFD), with 11.3 per cent, may well stir up problems for a SDP coalition.
Mr Scholz's conservative rival Armin Laschet, who leads the CDU-CSU bloc, signalled on Monday that he was not yet ready to concede the election.
Ahead of any new coalition, however, Mrs Merkel will continue to serve as the country's Chancellor.
Her successor faces many challenges. At the forefront is inflation, which is expected to surge further from the 3.9 per cent level in August, the highest level since 1993.
Germany relies on 41 per cent of its gas imports from Russia and prices have surged. Extensive borrowing to counter the pandemic raised goods prices by 5.6 per cent and services inflation is also a historically high 2.5 per cent.
In the meantime, Germany's economy - the largest in the European Union - has stagnated.
Last year, gross domestic product (GDP) shrank 4.6 per cent amid the restrictions to contain the outbreak of the pandemic.
The IHS Markit Germany Composite purchasing managers' index (PMI) fell to 55.3 in September 2021 from 60 the previous month, well below forecasts of 59.2, preliminary estimates showed.
The reading pointed to the slowest growth in private sector activity in seven months, amid ongoing supply disruption to manufacturing production, which is at an eight-month low.
Total public debt is expected to exceed 70 per cent of GDP this year, up from 59.7 per cent before the pandemic.
"The various international and economic crises during the 16 years of the Merkel government forced a rather reactive policy," said David Folkerts-Landau, an economist at Deutsche Bank. He hopes that the new government will be more proactive in dealing with US-China tensions, Brexit and the eurozone.
Mr Scholz, a former lawyer, first entered the German parliament at the age of 40 in 1998. As mayor of Hamburg, he was criticised for his mishandling of violent protests during a G-20 meeting that the city hosted in 2017. He served as minister for labour in Mrs Merkel's first cabinet after his appointment in 2007 and later became finance minister and her deputy in the Conservative SDP coalition.
Sep 28, 2021
London
GERMANY'S Finance Minister Olaf Scholz, the man widely expected to take over from Angela Merkel as the country's next Chancellor, will have to deal with a host of economic and geopolitical challenges when he assumes the top job.
The 63-year-old, who is also the vice-chancellor, is poised to form a new government after leading the Social Democratic Party (SPD) to a slim victory in the parliamentary elections last Sunday.
A rise in the German stock market and a steady euro following the vote, however, indicate that investors believe Mr Scholz will lead a relatively stable three-party coalition of the SPD, the Green Party, and the liberal business-friendly Free Democratic Party (FDP).
The SPD won 25.7 per cent of the vote, while Mrs Merkel's centre-right Christian Democratic Union (CDU) managed 24.1 per cent. The Green Party scooped up 14.8 per cent, and the FDP received 11.5 per cent.
Mr Scholz, a lifelong member of the SPD, described the result as "a very clear mandate to ensure that we put together a good, pragmatic government for Germany".
Many German commentators believe that there will be much horse trading as the SPD now holds only 206 seats - or 28 per cent - in parliament.
The next biggest proportion is the CDU and Christian Social Union (CSU) alliance that have a total of 196 seats, or 26.7 per cent. The Green Party, with 16 per cent of the seats, and the FDP with 12.5 per cent, are the main dealmakers.
But the right-wing Alternative for Germany (AFD), with 11.3 per cent, may well stir up problems for a SDP coalition.
Mr Scholz's conservative rival Armin Laschet, who leads the CDU-CSU bloc, signalled on Monday that he was not yet ready to concede the election.
Ahead of any new coalition, however, Mrs Merkel will continue to serve as the country's Chancellor.
Her successor faces many challenges. At the forefront is inflation, which is expected to surge further from the 3.9 per cent level in August, the highest level since 1993.
Germany relies on 41 per cent of its gas imports from Russia and prices have surged. Extensive borrowing to counter the pandemic raised goods prices by 5.6 per cent and services inflation is also a historically high 2.5 per cent.
In the meantime, Germany's economy - the largest in the European Union - has stagnated.
Last year, gross domestic product (GDP) shrank 4.6 per cent amid the restrictions to contain the outbreak of the pandemic.
The IHS Markit Germany Composite purchasing managers' index (PMI) fell to 55.3 in September 2021 from 60 the previous month, well below forecasts of 59.2, preliminary estimates showed.
The reading pointed to the slowest growth in private sector activity in seven months, amid ongoing supply disruption to manufacturing production, which is at an eight-month low.
Total public debt is expected to exceed 70 per cent of GDP this year, up from 59.7 per cent before the pandemic.
"The various international and economic crises during the 16 years of the Merkel government forced a rather reactive policy," said David Folkerts-Landau, an economist at Deutsche Bank. He hopes that the new government will be more proactive in dealing with US-China tensions, Brexit and the eurozone.
Mr Scholz, a former lawyer, first entered the German parliament at the age of 40 in 1998. As mayor of Hamburg, he was criticised for his mishandling of violent protests during a G-20 meeting that the city hosted in 2017. He served as minister for labour in Mrs Merkel's first cabinet after his appointment in 2007 and later became finance minister and her deputy in the Conservative SDP coalition.