German elections: the pendulum swings left

Polls have seen a dramatic shift to the left over the last couple of weeks. While last-minute changes remain a possibility, it now looks very likely that the next coalition government will be dominated by parties from the left. Among the different conceivable coalitions, a so-called traffic-light coalition, compromising the Social Democrats (SPD), Greens and Liberals (FDP) seems the most likely outcome. While this constitute s a shift to the left, the changes with respect to economic policy should be limited. That said, a more expansionary fiscal policy seems likely to make this coalition work.