Germany will elect a new parliament on 24 September 2017. The main contenders are the outgoing CDU Chancellor Angela Merkel and the SPD leader Martin Schulz. Whereas the Chancellor is defending the economic record of her government, her opponent is emphasising the growing inequality in German society. The latter is related to the labour market reaction to globalisation. Nevertheless, in terms of income inequality, Germany compares still very favourably with the other European countries. Given the booming economy, it remains to be seen whether social justice is indeed a major issue for the voters.
Vulnerabilities in the Chinese financial sector have increased significantly in the past decade. Given the high level and multiple sources of credit and liquidity risks and the opacity of both shadow banking activities and links between banks and non-bank institutions, containing these vulnerabilities poses a major challenge for the authorities. Measures recently taken to tighten monetary conditions and continued efforts to strengthen financial-sector supervision are positive actions. However, they could also weigh on economic activity, and the government’s resolve to stay the course on slowing the growth of domestic debt should soon be put to the test once again.
