German Coalition Collapses

Word of the Week Wednesday

Companion: Comes from the Latin term Companio where the ‘com’ derives from "with" while the ‘pan’ derives from “panis”, the Latin word for bread or food. Companion therefore literally comes from the person you share bread with.

German Coalition Collapses

Following the collapse of his coalition, the Chancelor of Germany Olaf Scholz announced yesterday that the country’s electorate will head to the polls on 23rd February for the Federal Election. This is assuming that he fails to pass a vote of no confidence which will be held in the Bundestag in December – a vote which he is widely expected to fail.

Yesterday’s developments follow the leader of the Christian Democratic Union party, Friedrich Merz, rejecting Scholz’s plans to hold a vote of no confidence in January, insisting instead that it be brought forward.

The Chancellor has been beset with a number of international and domestic crises including a slump in growth, persistent inflation, increasing competition from Chinese car manufacturing, the conflict in Ukraine and tensions over fiscal policy.?

Such crises have strained the three-party ruling coalition – which consists of Scholz’ left of centre Social Democratic Party, the left of centre Greens, and the centre right Free Democratic Party (FDP).

While the former two parties have campaigned to increase debt and government spending, the latter has favoured being more fiscally conservative. Such a dynamic reached a political climax when the coalition was split over whether to change the country’s debt rules and increase spending by €60bn. While this decision was ultimately outlawed by the courts, it demonstrated the divide within the coalition, alongside thwarting Scholtz’ fiscal agenda.

?

OPEC

Yesterday OPEC downwardly revised their demand growth forecast for 2024, with the organisation seeing a rise in demand of 1.82 million barrels of oil a day, down from earlier expectations of 1.93 million.

OPEC also decreased its demand growth forecasts for 2025 to 1.54 million barrels per day from 1.64 million.

The more cautious growth forecasts come as concern continues over the health of the world’s largest importer of crude oil, China, who imports 25% of the world’s total oil imports. (As we looked at on Monday, Chinese inflation again missed forecasts in further indication of supressed demand in the world’s second largest economy).

During their last World Oil Outlook publication, OPEC said that “Global oil demand is projected to reach 112.3 million barrels a day (mb/d) in 2029, representing a strong increase of 10.1 mb/d compared to 2023. However, the regional breakdown of this medium-term expansion shows a contrasting picture between continued non-OECD demand growth and rather stagnating OECD demand.”