Early Election Cheers Investors

Most analysts view Chancellor Schröder’s call for early elections as very positive.  The CDU is expected to coast to an easy victory, and with the Bundestag in CDU/CSU control the implementation of economic reforms can accelerate:

A plan by Chancellor Gerhard Schröder of Germany to hold early
elections would allow the country to avoid a year of political
stalemate, which would encourage stock prices to rise, analysts and
strategists said Monday.

The possibility that the opposition Christian Democrats would be
elected also supports stock prices, they said, since the party is seen
as pro-business.

"The market is likely to welcome Schröder’s decision," Dieter Bohlens,
an equity strategist at HSH Nordbank in Hamburg, said before the market
opened. "We could make some kind of headway in the economic front,
which is the most important thing right now for Germany."

The problem is that the voters were not necessarily voting to accelerate reforms.  The SPD’s defeat was the result of its consituency either staying home or voting for the opposition out of frustration and anger for the failure of the reform measures so far.  Floyd Norris has a more nuanced article about this in today’s New York Times. 

If voters are angry about economic legislation that rolls back the
social welfare state, and they take out their anger on the governing
party, does that make more such legislation inevitable?

As
undemocratic as that might sound, investors in Germany seem to think
so. As financial analysts said chances of new legislation had
increased, the country’s stock market rallied Monday after a stinging
defeat in regional elections for the Social Democratic Party of
Chancellor Gerhard Schröder, which led him to call for national
elections in the fall.

"Early elections could be a positive
trigger to recatalyze the reform agenda," wrote Julian Callow, chief
European economist for Barclays Capital, arguing that the leaderships
of both major German parties "wish to embark upon new reforms."

An interesting contrarian perspective is provided by the economist Albrecht Müller in his Web site NachDenkSeiten.  Müller believes the only rational course for the SPD would have been to admit the complete failure of the neo-liberal reform course. Schröder could have used the time up to the scheduled elections in 2006 to outline specific "corrections" (Korrekturen) to the reforms, establishing a viable alternative to the hardline neo-liberal programs of the CDU/FDP.  As it is, by calling for early elections Schröder has inflicted lasting damage on his party and on Germany:

Wenn Schröder und Müntefering eine solche Strategie fahren würden, dann
hätten sie 2006 eine Chance, weil dann die Alternative zu Union und FDP
klar würde und sich dafür wieder mehr Anhänger der SPD engagieren
würden. Nur mit einer solchen Kurskorrektur könnte man auch klar
machen, dass sich die konservativen Parteien CDU/CSU und FDP auf einem
Irrweg befinden, auf einem Weg, der jetzt schon für unser Land
gefährlich ist und noch gefährlicher wird, wenn man diesen Parteien
unser Land vollständig überlässt. Die Kurskorrektur wäre die
Voraussetzung dafür, die Union und die FDP sachlich angreifen zu können.
So hat die SPD keinerlei Chance für ein eigenes Profil. Ihre Führung
beschädigt ihre Wahlkampfchance und sie zerstört heute schon die
Möglichkeit zu einer glaubwürdigen Opposition gegen die schwarz-gelbe
Dominanz in Bund und Ländern. Deshalb ist der von Schröder mit seiner
Entscheidung beschleunigte Ruin der SPD wohl leider nicht von kurzer
sondern von nachhaltiger Dauer.