Germany's far-right is gaining ground

Luke Wilson (0:00)

A victory for the German far-right fuels calls for faster growth in Europe's biggest economy. It's World Business Express from the BBC World Service. I'm Luke Wilson. China pumps tens of billions of dollars into its banks to try and boost growth. And Jaguar Land Rover becomes the latest car maker to cut thousands of jobs.

A far-right party could govern a German state for the first time since the Second World War after alternative for Deutschland surged to first place in elections in Saxony-Anhalt in the east of the country. Preliminary results show the party has won almost 44% of the vote, three seats short of an outright majority. Beatrix von Storch, a German MP and deputy leader of the AfD, told the BBC which of their policies had appealed to voters.

Beatrix von Storch (0:51)

We are offering to stop mass migration. We are offering to stop adapting our country to Islam majorities. We do not want to spend our money in the world, but do not have money for our own people. We do not want to pay for Ukraine for the wars with what we don't have for our own people.

Luke Wilson (1:12)

It's a big headache for the Chancellor Friedrich Mertz, whose CDU party lost half of its votes in Saxony-Anhalt. He's now facing calls from business leaders to go further to boost growth in Europe's biggest economy. Carsten Breschi is chief economist for Germany at the Bank ING.

Carsten Breschi (1:27)

When you look at the domestic economics, Saxony-Anhalt is a small part of Germany. So this is not really key for the future of Germany. But the symbolic meaning, also via the political part means it puts pressure on the government in Berlin, the federal government, to actually continue and to speed up the reforms in order to get the German economy growing again.

Luke Wilson (1:52)

And that's something we've been hearing from the chairman of the German Federal Association of SMEs, Christoph Aalhaus. He told Bloomberg this morning, this shows Chancellor Mers and his government needs to go further. What can the government do here, do you think?

Carsten Breschi (2:06)

We need a clear strategy for affordable energy. We also need a better strategy to get innovation back.

We need more investments in infrastructure, in education. So these are all the measures that the government actually needs to bring in. Otherwise, we will see that the small reforms that we've seen will not really reach the economy, and therefore will also not reach voters' pockets.

Luke Wilson (2:36)

And we've seen today the Israeli investor Aurelius Capital and the German state of Lower Saxony are planning to take over one of Volkswagen's factories to repurpose it for defense. Could defense be a way forward for the German economy?

Carsten Breschi (2:51)

It's part of the solution, and we have been seeing this already over the last one or two years, that at least suppliers in the automotive industry have tried to diversify their products.

But the defense industry currently is not large enough in order to entirely replace the downturn in the automotive industry. It can be a company, it can be one part of the structural change, but the German economy, German industry will need more in order to get growth again.

Luke Wilson (3:24)

Karsten Boreski, ING's Chief Economist for Germany.

China is pumping nearly 54 billion dollars into some of its biggest state owned banks and insurers to shore up the country's financial system. It's the latest move from the Chinese government to try and boost this world's second biggest economy after growth slowed sharply to 4.3% between April and June. Earlier I spoke to Ginny Yan, Chief Economist at ICBC Standard Bank, and I asked her what the thinking is behind this latest move.

Ginny Yan (3:53)

In order for banks and insurers to provide liquidity for the real economy, so your corporates, your small and larger firm enterprises, even the private sector, you need these financial issues to be well capitalised.

Luke Wilson (4:07)

And given that we've had interventions like this before, do we know if it's enough to drive that real economy, like you say, drive up that domestic demand that has been weaker in China?

Ginny Yan (4:20)

The focus is not to drive up the demand necessarily. I think where it's weak are in specific sectors of the economy, particularly the household sector.

So to spur on household spending, you need sentiment to be lifted. You need corporates also to start to invest. So there's a multiply effect.

Luke Wilson (4:38)

And do you think we can expect to see more of these types of cash injections in the future?

Ginny Yan (4:44)

I would see if needed, annually such a sizeable injection may be rolled out, but it is a very carefully thought out approach, as you can imagine. In the meantime, there will be other policies. So for example, there may be other monetary tools available through the central bank, through the open market operations, for example. Or indeed, if certain sectors of the economy are looking to feel the pain a lot more than other sectors, there may be sector specific approaches as well.