One must wonder how the German chancellor Angela Merkel is feeling this morning, after her overwhelming, yet ultimately disappointing election result yesterday. Although Merkel’s conservative party took the largest share of the vote at 33%, this was down nearly 9% from the 2013 election, and the lowest percentage of the vote since 1949. Merkel’s coalition partners, the Social Democrats (SPD), also slumped to a postwar low of just over 20%, and have announced it will go into opposition.
Over the weekend G20 Finance Ministers dropped their long-standing pledge to ‘resist all forms of protectionism’, instead stating in a communique that they are ‘working to strengthen the contribution of trade to our economies’. The change of wording comes after the Donald Trump’s new US Treasury secretary Steven Mnuchin insisted that the traditional line of opposing protectionism was no longer relevant and said the new administration in the US was now looking for balanced trade over lower border tariffs, in line with Trump’s ‘America First’ statements.
The French Presidential election has been grabbing the headlines as the Penelope-gate scandal looks to have crushed Francois Fillon’s chances, instead propelling Emmanuel Macron as the likely runner against Marine Le Pen in the second round run-off. But even in Germany the elections may well be shaping up to be a close race, although it is still early days as German voters do not go to the polls until 24 September 2017.
For the second time in less than 2 weeks German Chancellor Angela Merkel's Christlich Demokratische Union (CDU) party suffered an electoral blow on the back of the German Chancellor’s open-door policy to immigration. In the state of Berlin the CDU polled 17.5% of the vote, its worst postwar result, with the anti-Islam Alternative for Deutschland (AfD) on course to win around 14%. With this result the AfD has now won opposition seats in 10 of Germany's 16 states ahead of next year’s election. Before voting began, Berlin’s Mayor Michael Mueller issued a warning that a good AfD result would be "seen throughout the world as a sign of the resurgence of the right and of Nazis in Germany".
At the G20 summit over the weekend the UK’s new Prime Minister Theresa May made her debut on the international stage where she has to begin to take on the task of implementing the UK’s vote to leave the European Union. As well as Brexit, she also has had to try to smooth relationships with the Chinese and Japanese governments which have become somewhat strained since the vote. On top of all this she will have to try to convince the G20 leaders that the UK has not turned its back on their core values of free trade and globalization. Not that all this has had any effect on UK data recently; after last week’s very good Manufacturing and Construction data which put Sterling very much on the front foot; this morning’s record UK services PMI figure of 52.9 from July’s 7-year low of 47.4 saw sterling again being driven higher. This was the biggest monthly gain since records began 20 years ago.
In February this year the Minsk II ceasefire agreement was signed to try and resolve the Ukrainian conflict. The agreement incorporates a 13 point plan to remove heavy weaponry, create a buffer zone and devolve powers to the separatists. After a series of four way conference calls between Petro Poroshenko, Vladimir Putin, Angela Merkel and Francois Hollande this year on its implementation the four leaders attended a summit in Paris on October 2 to resolve some outstanding issues. One key focus of the talks was the local elections in the separatist areas. This had become a contentious subject as the rebels had threatened to hold their own elections on October 18 and 1 November in Donetsk and Luhansk which would not have complied with the terms of the Minsk II agreement; these were already being dismissed by the Ukrainian government as “fake elections”.