But the makeup of the German parliament changed more over the weekend than it has for 11 years, bringing in the first centre-right-leaning government in more than a decade. The conservative wind affecting Germany is also blowing in other nations, and will be something multinationals and companies dealing with German businesses will be watching very closely, particularly in the UK.
Merkel’s personal survival cannot hide the fact that her Christian Democratic Union party lost votes. Although her latter-day campaign material, centring on beating the recession, was undercut by Germany pulling into recovery faster than the US or UK, roughly two-thirds of the German public felt that the outgoing government’s handling of the crisis was not good enough. Cautious voters and business people vividly recalled the ’millennial’ German recession and have seen similar moves made in recent months which proved costly and ineffective only a few years ago.
But Merkel’s silver lining, the long-desired coalition with a stronger Free Democratic Party, has kept her in place while shifting the policy lines. Much like the shift of popular favour (back) to the Conservative Party in the UK, there is a greater likelihood of a lower taxation culture developing under the new German government. For better or worse, we can expect much less government protection for struggling companies.
It will be telling of the new government’s policy line whether the soon-to-expire government-funded salary subsidy arrangements are extended to prevent an unemployment spike or curtailed to reduce spending. This change of approach could give cause for concern to UK companies dealing with or in control of German organisations. The new government is likely to develop a culture that no longer supports bailouts and government intervention, so companies will need to take every precaution to protect their interests in the coming months and perhaps be more ready to face unions if the salary subsidies come to an end. Even if these are laudable long-term aims, an increase in insolvency filings and unemployment in the near future would not be a surprise.
Yet for all this, the DAX’s 0.8 per cent jump in early trading on Monday (28 September) suggests a sigh of relief from the private sector, particularly those involved in the nuclear power industry, which may finally see some regulatory relaxation. As always, business craves stability and the end of Germany’s protracted feather-ruffling show at least means it can now provide certainty over speculation. Likewise, whatever happens with Opel, the end result will most likely happen faster now that the election is done and dusted. Political campaigning has a habit of obstructing policy and it will be a welcome sight to finally see election posters pasted over in Germany.
One of the most promising signs is the re-election of Secretary of State for Business Karl-Theodor zu Guttenberg; he was the only politician to state publicly that Opel would be better off in insolvency, to great political uproar. His re-election will be good news for international firms more concerned with the practicalities of corporate rescue than the politics.
Tougher inter-party negotiations in the coming months may protract the already-long German political process further. In some respects, then, it will resemble business as usual for lawyers involved in German holdings. But however slowly, the Bundestag must finally start to deliver on its promises, rather than talk about them.