5 Predictions Which Could Impact Germany In 2017

Happy New Year and welcome to 2017! I hope everyone had a relaxing Christmas and you are ready for all that 2017 may have in store. Below I look at 5 predictions for Germany in 2017, some of which could have a profound effect, some of them perhaps less so.

An Important Year for European Politics

2017 is a very pivotal year for European politics. Significant further progress in technology and a more jittery economy, given some of the pressures which Europe will have to face this year, could point towards some or all of these predictions becoming reality.

1. Angela Merkel will be re-elected

Germany in 2017

We will most likely continue to see “Mutti” here after October’s general election

So I agree that this one isn’t really sticking my neck on the line. In all likelihood, Merkel will win a 4th term as Chancellor of Germany in 2017 and will almost certainly in that instance have to govern in another Grand Coalition. What does surprise me is the enduring popularity of a politician who has achieved so little in 11 years in office. Regardless of where one stands on the political spectrum, Merkel has been a very cautious Chancellor and seems to be popular among Germans who are broadly content with the status quo. However, the question for me still remains: What does Merkel really stand for? And will she be able to last the whole 4 years?

…and the conservative right-wing AfD will enter the Bundestag with 13% of the vote

Germany works on a proportional representation system with a 5% hurdle necessary to enter the Bundestag (Germany’s lower house of parliament). For the first time, a party to the right of Merkel’s CDU is almost certain to enter the Bundestag having achieved the 5% hurdle in a federal election. I will add a proviso here to say that the popularity of the AfD will vary wildly depending on how the results of the elections in the Netherlands (March) and France (April/May) develop. If Geert Wilders or Marine Le Pen get elected, or come within sniffing distance of victory, this could either give an extra push for the AfD or could also repel a lot of German voters who may have cold feet when it actually comes to voting for a controversial party.

2. The planned tolls for German roads will be dumped

PKW Maut

I just can’t ever see it happening in its current form.

Most likely as a result of the election’s outcome, this policy will be sacrificed in coalition negotiations. It was the brainchild of the CSU, the Bavarian sister-party of Merkel’s Christian Democratic Union, and had only lukewarm support elsewhere in Merkel’s party. This would be an easy sacrificial lamb for Merkel to offer up during negotiations. What will replace it as a proposal to improve Germany’s desperately needed improvements to the Autobahn network remains to be seen.

3. Apple Pay will (finally) launch in Germany

Coming to Germany in 2017?

Finally coming to Germany in 2017?

Despite Germans’ enduring preference for using cash and businesses’ enduring reluctance to accept card payments, the march of technology will finally reach Germany this year. I predict that contactless payments, specifically Apple Pay, with the huge popularity of the iPhone will finally be the push needed to tempt Germans away from their love of cash. The simplicity and the fact that the money is debited immediately (just like using a Girocard) should help to convince Germans that this is the future. There have been musings and rumours among popular Apple-watchers and blogs that Apple Pay will launch in Germany for a while. Contactless payment cards are being issued now by most German banks and Apple will not want to be left behind.

Another related impact of increasing popularity of contactless payment and the ongoing developments in technology will be the gradual death of the Waben concept for public transport. Instead of having fixed zones, the future will be that our smartphones will track our journeys using GPS and we will be billed for the actual distance travelled. RMV is already trialling this and is keen to get customers signed up for beta tests.

4. Rents will continue to rise in real-estate hot spots

German Property Market in 2017

Rents look set to keep rising in hotspots through 2017

The property market in Germany’s major cities and sought after university towns shows no signs of slowing down. Rising rents, and with it the growing inequality and access to good, affordable housing, will be a major election battleground for the Social Democrats (SPD). Low interest rates, which show no sign of rising, will ensure that mortgages remain cheap, giving the real-estate market the fuel it needs to continue growing. Certain areas of Munich, Frankfurt and Hamburg are already very much in bubble territory. Coupled with severe lack of supply in popular areas and a reasonably strong economy, this would point to rises in the cost of renting an apartment continuing throughout 2017.

5. The Euro will fall to parity with the Dollar

The Euro and Germany in 2017

Will the Euro survive 2017 in tact?

The shock which accompanied the election of Donald Trump as U.S. President did not spread to the value of the Dollar. Surprisingly, the Dollar and the Dow Jones have remained strong. Europe has 3 important elections next year (The Netherlands, France and Germany) with populist parties riding high in the polls in the former two. Prime Minister Theresa May has already confirmed that the U.K. will trigger Article 50 to begin the process of Brexit before the end of March. Italian banks are wobbly and Greece is never far away from another economic crisis. The underlying problems have not gone away, even though it is not in the news. There is every reason to expect that at least one of these events will trigger jitters in the markets which could negatively impact the Euro’s value.

So, there we are. Bayern will win the Bundesliga and some part of Lufthansa will go on strike again. But that’s hardly even newsworthy. Maybe one day Mainz will be Champions. I live in hope.

Here’s to a successful, healthy and prosperous 2017!

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