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Coalition Politics: Compromise is Key to Funding Germany’s Future
Investor focus has been on inflationary pressures and the impact on bond markets as many government bond yields continue to widen. Intertwined with these issues is how central banks react and adapt to this environment.
A three-party coalition could soon govern Germany for the first time in the country’s history following recent elections. Matthias Hoppe, senior vice president and portfolio manager, Franklin Templeton Investment Solutions, believes uncertainty caused by coalition talks is likely to increase volatility in Europe’s financial markets, but changing a conservative attitude to public spending is the real challenge for a new government as Germany wrestles with the reality of increasing macro-economic imbalances and a stated aim to achieve carbon neutrality by 2045.
Fears of peak growth and central bank hawkishness as well as recent tax hikes to pay for the impact of COVID-19 stimulus measures have all contributed to recent market bearishness.
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