Germany: Politics again back in focus - BBH

Analysts at BBH suggest that Germany is center stage today as firstly, talks between the Merkel's CDU/CSU and the SPD are in overtime, but officials seem optimistic that a deal can still be struck that would avoid a minority government and new elections.  

Key Quotes

“The latest polls warn that the SPD may have slipped below 20% public support.  The SPD members get a final say on whatever agreement may be struck, but the threat of new elections seems to be a poison chalice.”

“Second, after a series of work stoppages, IG Metall struck a deal with employers.   It is a complicated deal with one off payments and covering 27 months.  The headline of a 4.3% wage deal over 27 months seems to downplay the wage increase, which is something like 3.7% for 2018 and a little more (~4.0%) in 2019.  The deal also includes greater flexibility in terms of hours-- a right to reduce the workweek to 28 hours for two years, with the option to return to full-time later.  One issue is whether the deal can be used as a boilerplate for other industries that facing negotiations this year, including chemical, construction, rail, and telecom workers.”

“Third, German factory orders jumped 3.8% in December, a gain of more than five times the median forecast in the Bloomberg survey.  The November series was revised to show a 0.1% decline instead of a 0.4% fall.  Big ticket items drove the increase, and capital equipment orders from EMU members jumped 18.5%.  Domestic orders rose a still-healthy 0.7%.”