Sunday sees the second major election this year for one of the world’s major economies when Germans go to the polls in a federal election that could see a subtle, but important change in the political landscape.
As well, voters in Portugal go to the polls on the same day (see below).
Of the two, Germany’s election will be more important given that it is the world’s biggest exporter and one of the top four economies and dominates Europe.
The election result in Germany has the capacity to hit the value of the euro, change voting inside the EU and the European Central Bank.
But it will see nothing like the dramatic changes wrought in Japan by that country’s epoch-making national poll on August 30 which saw the long time Liberal Democratic Party tossed out and replaced by the Democratic Party of Japan.
That has already made the rest of the world start wondering about what the new government will do.
In Germany, the results of Sunday’s poll are likely to see one significant change, but that can’t be guaranteed.
But it could also see some significant changes in business in employment as business moves to make changes in the wake of the poll.
The Christian Democratic Union, led by Chancellor Angela Merkel, is likely to be returned as the dominant party in the government.
The question is whether she will ask the Social Democratic Party, the current partner in the Grand Coalition, to stay, or pursue a link up with the more conservative, pro business Free Democratic Party, which has made a comeback in pre-election opinion polls.
(Go to the international website of the German magazine, Die Spiegel for some good summaries and poll data.)
The Free Democratic Party has made a crucial step towards a possible link with the CDU by firmly rejecting any chance of joining a leftwing-led coalition with the SDP after Sunday’s election.
The FDP rebuffed overtures from the SPD, ruling out any chance that it would join them in a three-way coalition with the Greens.
The FDP instead said it was willing to join a coalition led by Ms Merkel’s conservative Christian Democratic Union, in what would be Germany’s first centre-right government since 1998.
The two parties have promised to lower taxes, cut red tape and reverse a previous government decision to abandon nuclear power, although the FDP has a more vigorous pro business policy.
Opinion polls have suggested that a CDU-FDP government is the likeliest outcome of the election.
But news Thursday night suggest that the FDP is losing votes to the SDP, raisng the possibility that the existing coalition could be reformed.
The polls seem to be signalling a resurgence of the political left in Germany, a move that saw Ms Merkel’s CSU lose ground in state polls a couple of weeks ago to leftist parties or coalitions.
According to some polls, the SPD has been taking votes in polls from the dominant CDU, which had a big lead up to 10 days ago.
That lead has narrowed, hence the increased talk of some sort of coalition with the Free Democrats, who seem to on track to get more than the 5% of the vote needed to get representation.
Now there are stories in the German media about a possible renewal of the 2005 campaign, when a slump in CDU support forced the party into a “grand coalition” with the SPD.
That linking has managed to get Germany through the credit crunch and recession, although Germany was and remains badly hurt.
The world’s biggest export machine has been wounded (as has China and Japan).
Figures out this week show the extent of the downturn in German exports.
German exports in the first half of this year fell 23.5% from the same period of 2008, thanks to the credit crunch and recession.
The Federal Statistical Office said the total exports of the first six months of this year were 391.2 billion euros (about $US573 billion) with shipments to EU member states down 24.3% and exports to the euro zone were off 22.7%.
German exports to countries outside the EU fell 21.9%, led by a 39% drop in shipments to Russia (all those BMWs and Mercs) and a 35.7% drop in shipments to Turkey.
German imports shrunk by 18.2% in the first six months of 2009 from the same period of last year, another good sign of the continuing slide in the economy.
The parties in the government have agreed on some significant measures to combat this downturn in exports and output.
These included the 5 billion euro car scappage scheme that has helped car mad Germans buy hundreds of thousands of more efficient new cars, keep factories open and people employed.
The coalition, especially Ms Merkel and her conservative colleagues, had to be dragged kicking and screaming towards more stimulus spending and aid for the country’s banks, especially the huge property lender, HRE, which has lost over 100 billion euros and has been nationalised.
Several other small state banks have been crippled.
But once the poll result is known and the shape of the new government confirmed, there could be a spate of job cuts, factory closures and other moves by employers who have been holding off to allow the re-election of the pro-business Ms Merkel.
The Financial Times has carried several reports in the past month or so quoting senior employer representatives talking about the possibility of a flood of job cuts and factory closures, especially in parts of the car industry.
As well, some in banking and finance worry that the true state of the country’s financial system has been covered up ahead of the election, and that more bad news will emerge on losses in the September quarter and half year.
Germany is recovering from the slump: exports may be still down, as is industrial output, but the economy grew marginally in the June quarter and will grow again this quarter because of the car scra
