The German chancellor Angela Merkel is to start talks on a "groundbreaking coalition government" with the Greens and Liberal Free Democrats after her conservative bloc resolved a "long-running dispute over refugee policy", says Guy Chazan in the Financial Times. Merkel's Christian Democrats and its Bavarian sister party, the Christian Social Union, have agreed to cap the number of refugees annually at 200,000, except in emergencies.
Talks with the FDP and Greens will start on 18 October. The three parties are not natural bedfellows, but Merkel has little choice after the Social Democrats (SDP) ruled out talks. Merkel's CDU/CSU bloc and the Social Democrats (SDP), her coalition partner of the past four years, performed poorly in last month's elections, propelling the far-right Alternative for Germany into parliament as the third-largest party.
Europhiles worry that the Jamaica coalition so-called because the black, green and yellow colours of the three parties make up the Jamaican flag could be "dangerous" for the EU, particularly given the "increasingly euro-critical" FDP, says Guntram Wolff in the Nikkei Asian Review.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
But the worries are overblown. The FDP's desire for countries to be "held more strictly to the stability and growth pact" is shared by Wolfgang Schuble, Germany's outgoing finance minister. A eurozone budget or banking union is a red line for the FDP, but even under a CDU/SPD coalition, Germany would not have been "willing to provide ample tax funding to help ailing euro area economies".
And the coalition could be a boon for Germany, as all the ingredients for future success are there. The Greens and the FDP want to upgrade digital strategy, mitigate climate change, liberalise the services sector, improve education and cut taxes to boost investment. So a deal could catalyse important economic reforms that will "trigger growth and investment" in Germany and support demand in the wider eurozone. The key, however, will be to delegate responsibility in a way that ensures campaign promises turn into policies.
-
Should you invest in UK equities?The FTSE 100 hit a record high this week, but UK equities remain unloved and undervalued compared to their global and US peers. Should you snap them up at a discount?
-
State pension errors: DWP urged to check for mistakes among divorced peopleFormer pensions minister Steve Webb says there are a high number of divorced women on low state pensions. Now MPs want the DWP to check if there were any errors in “potentially underpaying men and women who are divorced”.
