Business urges politicians to form a stable government

The ratings agency Standard & Poor's warned that it would cut Germany's gilt-edged AAA creditworthiness should urgent structural reforms be further delayed.

Deutsche Bank AG Chairman Josef Ackermann called on the political parties to end their quarrels, find a reasonable consensus and form a stable government capable of taking the required steps for an economic recovery.

He pleaded for strict deregulation, fiscal consolidation, an overhaul of the heavily protected labour market and changes of the health and pension systems.

'In the long run a state can provide social welfare to its citizens only if it stimulates continuous economic growth'.

Raghuram Rajan, chief economist of the IWF, said it was the duty of the politicians to convince the people that social and economic reforms were absolutely vital for the future of the Germans. In particular business conditions for small and medium-sized companies would have to be improved drastically.

The IWF has forecast a growth of Germany's economy of only 0.8 per cent this year and 1.2 per cent in 2006. In both years, Germany is at the bottom of the league of the industrialised countries.

Meanwhile financiers and industrialists cautioned against overreacting to the dive in investor confidence only days after the inconclusive elections.

The German equity markets, after a slight drop, recovered quickly. The same goes for the euro, who had fallen to a monthly low of $1.20 the day, but picked up again slowly but surely.

The American Chamber of Commerce believes that the election results will not affect US investments in Germany. Peter Dixon, Chief Economist of Commerzbank AG, London, doubts that the election results will have a dramatic impact on the economic situation.

'After all, Chancellor Schroeder with his Agenda 2010 had already set the course for an economic recovery', he said. 'The results will become evident in due course.'

The big economics research institutes IHW, DIW and IW seem to increasingly favour a grand coalition of the Conservatives and the Social Democrats, providing a clear majority in the Bundestag.

DIW President Klaus Zimmermann declared that only the two big parties - CDU/CSU and SPD - could enforce the long overdue reform of the federal structures, the tax system and the social welfare schemes.

To put it in a nutshell: nolens volens, the two large 'people's parties' will be urged on by the simple and very evident economic necessities.