And finally...Merkel's third term in office

Almost three months after the federal elections, Angela Merkel can officially begin her third term in office on Tuesday. It was an exciting news weekend in Germany. The grand coalition has finally received the green light from the SPD grassroots. According to the SPD, 76% of its grassroots members taking part in a postal ballot voted in favour of joining a coalition with the Christian-democrats. Almost 80% of all SPD members participated in the vote. After this final green light, the new government will officially be sworn in on Tuesday and can finally start work. Yesterday evening, all government parties named their ministers. The most interesting nominations are another term as finance minister for Wolfgang Schaeuble; the first-ever cabinet member with Turkish origin, Aydan Özoğuz, as Under Secretary for immigration, refugees and integration; the first-ever female defence minister, Ursula von der Leyen and, finally, Jörg Asmussen’s nomination as new Under Secretary in the labour ministry. The move from ECB executive board member Jörg Asmussen came as a big surprise. With Asmussen’s exit, out of all German members of the ECB’s Governing Council, only Otmar Issing has ended his official term. The other four – Welteke, Stark, Weber and Asmussen – all left earlier (due to different reasons). It seems as if Asmussen’s move to Berlin is not driven by any monetary policy conflicts but rather by his private life. With Asmussen’s exit, the ECB will lose an important connection to both the German government and the German public. In the public debate on the ECB’s monetary policy, Asmussen has been an important counterweight to Bundesbank president Weidmann. Although legally speaking no single country has a permanent seat in the ECB’s executive board, it seems impossible that Asmussen will not be replaced by another German. Yesterday, three names were already being mentioned: current Bundesbank vicepresident Lautenschläger, chief financial supervisor König and a member of the Council of Economic Advisers, Buch. Interestingly, all three possible candidates are women. European heads of state are responsible for the nomination. In our view, the nomination could take until the next Spring summit of European leaders. In theory, other countries could also put forward a candidate for the succession of Asmussen but this looks highly unlikely. Back to the new German government. The nomination of all ministers shows that two of the most important policy topics for the coming years will be highly influenced by the social-democrats: the introduction of a minimum wage and the energy transition. The social democrats received the ministries for labour and a new “super-ministry” combining the economy and energy. Angela Merkel as chancellor and Wolfgang Schäuble as finance will remain in the driving seat of the other well-known “hot topics: fiscal and European policies, including the Eurozone crisis management. All in all, the composition of the next German government shows that the socialdemocrats have negotiated well. The next government will be a coalition of two parties almost at eye level. Some might see this as a problem as it does not fully reflect the results of the elections. In our view, however, this distribution of power could eventually turn out to be a blessing, at least if it leads to a more stable coalition.