– Are the EU and Euro on the Ropes?

German stalemate likely to harm growth and EU decision-making
By Mark Beunderman

Experts have warned that the political deadlock following Germany’s elections last Sunday will hit the country’s already sluggish economy, while Brussels fears the deadlock will stagnate its own decision-making.

Sunday’s vote left the country without a clear leading party, and with no clear centre-left or centre-right majorities.

FT Deutchland reports that an index by the Mannheim-based Centre for European economic research (ZEW) indicates that the election deadlock has a clear negative impact on growth expectations.

The index, which reveals the first indication of the economic climate after the elections, slipped 11.4 points to 38.6.

The ZEW issued a strong warning that the "uncertainties on the future economic policy direction will be a danger to the investment climate and therefore for [economic] recovery".

The ZEW index had pointed upwards since May, as analysts were speculating on a clear future majority of a reform-minded coalition of conservatives and liberals – hopes which were dashed on Sunday.

Experts commented that the political uncertainty came on top of high oil prices, which had already forced economic expectations down.

Meanwhile, circles in Brussels are nervous that the German political deadlock will also negatively affect the EU’s own decision-making, as Berlin is key in important policy dossiers.

German conservative MEP Hartmut Nassauer told Die Welt that there was a risk of "stagnation" in Brussels decision-making if political power struggles in Berlin were to drag on.

European commissioner for industry Gunter Verheugen, a German social democrat, said on Monday (19 September): "When Germany as an important EU member is not capable of decision-making, the whole EU stagnates".

Brussels in the coming months faces a variety of heavy-weight policy dossiers, including controversial laws like the services directive and a key chemicals law, and most notably the EU budget for 2007-2013.

In the meantime, however, parties in Germany are continuing to consider unorthodox coalitions.

Bavarian conservative leader Edmund Stoiber has said he prefers a coalition with liberals and greens – the latter of which have traditionally been a prime subject of attacks by Mr Stoiber.

And despite heavy mutual blasts between the conservative CDU and the social democrat SPD over the past days – with both parties claiming the chancellorship – the parties will on Thursday meet to assess chances of forming a government, German press reports.

The meeting will be between CDU chancellor candidate Angela Merkel and the president of current chancellor Schroder’s SPD party, Franz Muntefering.