If you haven’t heard mention of it in the news, or read about it in the papers or your portfolio manager’s commentary, there’s an election coming up in Germany. It’s important too! The outcome of this election has implications well beyond Germany, and well beyond Europe. In this post, we’ll look over the basics of the election, so that you’ll know how to make sense of the results when they come later this month.
First, why is this election so important? There are a couple of main reasons. Germany is one of the main centres of gravity for the European Union. Their export-driven economy is the engine driving a nascent EU recovery, and Germany’s ability to continue churning out that growth is highly interrelated with the domestic policy agenda of the government. Secondly, Germany’s one of the big wheels in the EU and almost nothing gets done without its approval. Read more
Another election cycle is over, though with over US$6 billion spent on the various campaigns across the country, the political landscape looks practically the same today as it did yesterday. This, I fear, may be the outcome the U.S. economy could most ill afford at this time. While President Obama’s reelection delivers clarity on a few issues important to the economy, the partisan status quo that remains in Congress likely raises the risk of recession.
First, the clarity. With Romney out of the equation, President Obama’s signature health care reform is probably cemented in place. You can debate the economic impacts of the legislation, but at least businesses and individuals will know that it’s here to stay and can begin forming up plans to adjust to the new health care regime. Next, Fed chairman Ben Bernanke still has a job…if he wants it. Governor Romney had pledged to remove Bernanke from his post when his second term expires in 2014. This probably ensures that Bernanke’s easy-money policies will continue, even if he declines a third term.