Angela Merkel's departure from German government may result in a massive influx of private investment.
Driving the news: The center-left Social Democratic Party, led by chancellor candidate Olaf Scholz, clinched a narrow victory in Germany's federal elections. It now will seek to form a coalition government by year-end with the Greens and the Free Democrats.
- Everyone in that potential coalition agrees that Germany needs to boost public spending, which has been around net-zero for more than a decade. Particularly when it comes to areas like digitizing and greening the country's economy.
But they don't agree on how to get there.
- Greens, who want huge new public investment, proposed a wealth tax and would remove Germany's version of the debt ceiling (which is enshrined in the country's constitution).
- Free Democrats say tax hikes are a nonstarter and that the "debt brake" must be respected.
A likely compromise would be new incentives to attract outside investment, including from private equity firms that a Merkel lieutenant once famously derided as locusts. Particularly now that there is so much dry powder devoted to infrastructure, broadly defined.
- Private equity investment in Germany hit records in 2019, before pulling back a bit last year because of the pandemic.
- The upshot is that investors are ready for increased opportunity and have personnel in place.
The bottom line: No coalition government ever exists until it does, so there's still time for political maneuvering. But yesterday's results set the stage for Germany to formally hang a "welcome" sign for the onetime locusts.
Go deeper ... German election: Social Democrats narrowly beat Angela Merkel's bloc
