Germany: Political drama continues – BBH

Analysts at BBH explain that the political drama in Germany continues as after the Free Democrats abandoned coalition talk, pressure mounted on the Social Democrats to re-enter a Grand Coalition.  

Key Quotes

“They have done so in two of three governments led by Merkel.  The SPD appears to have lost its way and support by voters fell to its lowest in the modern era.”  

“If the SPD enters the government, that would make the AfD the main opposition party and with that comes certain parliamentary privileges that both the CDU and SPD would want to deny it. Merkel meets with the SPD head Schulz today.  After a poor campaign, Schulz support within the party has waned.  There is no immediate deadline, but the lack of a government two months after the election could pose challenges German's European positions.”  

“Europe is fortunate that the economy is in a strong position.  The German manufacturing PMI was confirmed at 62.5, a new multi-year high.  It finished last year at 55.6.  The EMU aggregate reading ticked up to 60.1 from the flash of 60.0.  It was at 54.9 at the end of 2016.  It is not just a German story.  Consider that Italy's manufacturing PMI rose to 58.3 from 57.8 and 53.2 at the end of last year.  France is also fully participating.  The flash manufacturing PMI rose to 57.7 from 57.5 flash reading.  It was at 53.5 at the end of 2016.”