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July 26, 2017

Has Schulz blown it?

We think that the analysis by the German national broadcaster Tagesschau on the current political scene is spot-on. Unless a miracle happens after the holiday season, the SPD has blown it. ARD/Deutschlandtrend’s latest poll has the CDU at 39% against the SPD at 23%, which is more-or-less in line with other recent polls. The FDP gets 9%. Together, CDU/CSU and FDP would have one percentage point less than the combined opposition, but that gap is obviously within the error margin of the polls. The best result the SPD can hope for now is to prevent such a centre-right coalition from emerging. The CDU/CSU and FDP will always be able to form a coalition with the Greens as a third party, but our expectation is that the SPD would rather agree to join another grand coalition. 

The article suggests that Schulz has made irrecoverable mistakes - no agenda in the beginning; an implausible attack on Angela Merkel, whom he accused of being anti-democratic; and lack of credibility in his criticism of her response to the refugee crisis, since everybody knows that the SPD supported the policy at the time. His last-minute change of election campaign manager shows a degree of panic in the party’s high command. 

There are not many opportunities left for the SPD to change course. The holiday season has now started, with Angela Merkel and other politicians descending on Bayreuth for the Wagner festival. Once they emerge from the holidays, there will be a little more than a month of campaigning left.

In our view, the most the SPD can now achieve is to prevent a CDU/CSU coalition, though this would also be a poisoned chalice because another grand coalition might end up destroying the party. If a grand coalition is the only feasible two-party coalition option, it will happen simply because the lure of power and government limousines is irresistible to SPD leaders, even if the long-term consequence is the destruction of their party.

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July 26, 2017

Housing benefits cuts expose Macron's weakness

Emmanuel Macron is to pay dearly for this reform to cut housing benefits (APL) by €5 per month. It gives a political platform to those poorer citizens who will be affected. There are already voices out there accusing Macron of not knowing what poverty is. Not the kind of PR you want when you are negotiating with trade unions about labour law reform. The handling of this crisis may well expose the French government as arrogant and out-of-touch.

It is a stupid measure, concludes Jean Marc Vittori. It only raises €100m out of the required €18bn in savings. It is deeply unjust, as it affects poor households. And it could well compromise other more serious reform efforts. Yet, housing policies cost the state €40bn yearly. Relative to GDP this is twice as much as the European average and four times the German level. Yet, houses are not better than elsewhere. And studies showed that, when the housing support was extended to students, it benefited the landlords who just raised the rents. The result was rising house prices. The minister Jacques Mézard promised a deeper reform in the autumn. There is clearly some more work to be done.

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