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POLITICAL RISK: Germany Set For Snap Election By End-March

POLITICAL RISK
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Confirming earlier wire headlines, German Chancellor Scholz tells reporters from multiple outlets that he will call for a snap election by the end of March 2025, with a vote of confidence to be held on January 15. This comes after Scholz dismissed Finance Minister Lindner following the collapse of Traffic Light coalition (SPD, Greens, FDP) talks late Wednesday.

  • Speculation over the collapse of the coalition had been swirling, though a gov't spokesman had said Monday that the coalition had been expected to continue until the next regular election. Scholz's decision brings forward the election from its next scheduled date of September 2025. Coming into this week, analysts had eyed March 9 as a possible early election date.
  • The decision comes immediately after the Trump presidential election win in the US, which Scholz cited as making decisions even more urgent. Trump is seen as seeking tougher tariffs on European goods and pushing European countries to pay more for defense and security, necessitating a policy response from Germany which the coalition was unable to come to agreement on.
  • The coalition had been divided on policy: Lindner's publishing of a budget document outlining tax and spending reductions and looser business regulation on 1 Nov countered the details of a massive investment programme put out by Greens Economy Minister Habeck a week earlier.
  • The conservative Christian Democratic Union (CDU) is seen as favourite to win a plurality in the next election, with a CDU-SPD 'grand coalition' looking the most likely outcome at present.
  • Very little response in EURUSD or Bund futures, though that could change once European traders are back at their desks in the morning.
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Confirming earlier wire headlines, German Chancellor Scholz tells reporters from multiple outlets that he will call for a snap election by the end of March 2025, with a vote of confidence to be held on January 15. This comes after Scholz dismissed Finance Minister Lindner following the collapse of Traffic Light coalition (SPD, Greens, FDP) talks late Wednesday.

  • Speculation over the collapse of the coalition had been swirling, though a gov't spokesman had said Monday that the coalition had been expected to continue until the next regular election. Scholz's decision brings forward the election from its next scheduled date of September 2025. Coming into this week, analysts had eyed March 9 as a possible early election date.
  • The decision comes immediately after the Trump presidential election win in the US, which Scholz cited as making decisions even more urgent. Trump is seen as seeking tougher tariffs on European goods and pushing European countries to pay more for defense and security, necessitating a policy response from Germany which the coalition was unable to come to agreement on.
  • The coalition had been divided on policy: Lindner's publishing of a budget document outlining tax and spending reductions and looser business regulation on 1 Nov countered the details of a massive investment programme put out by Greens Economy Minister Habeck a week earlier.
  • The conservative Christian Democratic Union (CDU) is seen as favourite to win a plurality in the next election, with a CDU-SPD 'grand coalition' looking the most likely outcome at present.
  • Very little response in EURUSD or Bund futures, though that could change once European traders are back at their desks in the morning.