By Michael Every of Rabobank
We ended last week with the Dutch thinktank acknowledgement that "The world as we knew it no longer exists.” We start this week knowing many are going to be profoundly uncomfortable with the new world that replaces it. Not the weekend op-ed in the Financial Times asking, ‘Is Keynesianism dead?’ adding “When debt is the disease, fiscal medicine may be as likely to harm as heal,” though that will shock many. Nor that the US just blew up three Iranian tankers, and Iran is firing at others, when such economic warfare is only going to drive inflation higher.
Rather, Germany’s state election in Saxony-Anhalt saw the far-right Alternative für Deutschland (AfD) emerge by far the largest party with 44%, over double what it got in the last election. It may be able to govern alone depending on what happens to smaller parties falling under the 5% threshold. If not, it will need a coalition partner. The mainstream --but no longer main-- parties like the Social Democrats (SDU), on 9%, and governing Christian Democrats (CDU), on 17%, refuse to work with it. However, the far left populist BSW party, which won 5%, might do so.
To say this upends post-war German electoral politics is an understatement: it would be the first time the "far right" would be in power since 1945. Moreover, the two extremes of the German political spectrum would be the majority, not “the sensible center combines to win – because markets.” Indeed, a ‘horseshoe effect’ of opposed ant
