Created
: 2024.09.02
2024.09.02 23:40
As is happening in France with the extremes on the left and right of the political spectrum taking a larger proportion of votes in the parliamentary elections, this weekend saw a similar pattern in two regional elections in Germany yesterday. AfD is on course to win 32.8% in the state of Thuringia and marks the first win for a far-right party since World War II. The CDU/CSU was a second with 23.6% of the vote. It was the other way around in Saxony with the AfD falling short with 30.6% of the vote while the CDU/CSU won a slightly larger share with 31.9%. The SPD did appallingly bad winning just 6.1% in Thuringia, the worst result in postwar Germany while both the Greens and the FDP both fell below the 5% threshold required in order to be represented in the state parliament, MUFG FX analysts note.
"The evidence of disaffection was highlighted by the surge in popularity on the left as well with a new far-left party BSW winning 15.8% of the vote in Thuringia and 11.8% in Saxony. Given the performance of the two extreme parties it is clear that Germany is heading slowly toward the very same political outcome as in France - political gridlock. AfD will not be in a position to govern in Thuringia given all other parties have stated they would not enter a coalition with AfD which mean the CDU/CSU would be required to consider governing with other parties including the far-left party BSW. BSW are more supportive of Russia and are calling for a change in policy on Ukraine."
"The next general election is scheduled for autumn 2025 and based on these results it seems difficult to see a strong government emerging. The political backdrop in the euro-zone has never been as bad since the single currency emerged. Weak GDP growth in Germany for a sustained period is at the heart of voter anger. Five of the last ten quarters for GDP growth has seen a contraction. Incredibly, Germany's economy is a mere 0.2% larger than in Q4 2019 ahead of the covid pandemic. In the US, real GDP is 9.4% larger over the same period."
"We will be releasing our monthly Foreign Exchange Outlook this afternoon and we will be showing a weaker US dollar forecast profile but the mixed global economic backdrop - commodity prices are down 10% since May, the elevated geopolitical risks and the complete political gridlock at the heart of the euro-zone all point to reasons to remain cautious over the extent to which the dollar will weaken going forward."
Created
: 2024.09.02
Last updated
: 2024.09.02
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