A red-green-red government after parliamentary elections will be the outcome German businesses fear most. IFO chief Clemens Fest is convinced of this, he told Bloomberg-TV in an interview.
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Fuest said in an interview on Friday that an alliance of the SPD, the Greens and the left could create international uncertainty over German foreign policy, increase fiscal pressure and lead to interventionist climate policy.
The Ifo Business Climate Index hit a 5-month low today, weighed down by continued delivery bottlenecks that have hampered output in German manufacturing.
An important question is whether we have a majority on the left, a majority of the Social Democrats, the Greens and the far left. This will likely lead to a left coalition, in which case there will be a noticeable shift to the left, which is a concern for the economy. If there is no such majority, the formation of government may take some time, but whatever government it emerges from, if it is a moderate government, there will be no great fluctuation in economic policy, that is, the outcome does not play such an important role. “The real difference is between the left coalition, including the far left, and the rest,” said Ifo chairman Clemens Fuest.
Neither the Social Democratic Party nor the Green Party have so far explicitly ruled out a partnership with the left. According to an analysis by Bloomberg Economics, a left-wing coalition will increase tax revenues as everyone plans to raise taxes for high-income families and the wealthy. At the same time, spending will also increase dramatically – and the debt brake will likely be history.
The introduction of a wealth tax “would put significant pressure on investment in Germany and lead to capital outflows,” Fuest said. It is not known if this will happen, but there are concerns about taxes. ” (kilobytes)
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