A Poor Showing for Merkel’s Party in German Elections – the Questionable Future of the Euro


It is too soon to ring the death knell for the euro but its future is in doubt.

The EU might not have the stamina to go the distance. People are tired of austerity.

There doesn’t seem to be much of a lifeline to look forward to. The Germans aren’t going to assume the debt of other profligate nations and the ECB’s loose monetary policies have a slim chance of working. Nothing seems to address the lack of competitiveness – they’re not very business-friendly.

Allowing inflation, another poor solution, will make the euro very unappealing to investors. Bonds are very risky and they would have to provide a high yield to make them worth investing in and that won’t happen. [Bloomberg]

The Greek coalition is in doubt, moving them closer to new elections, and putting their continuation in the euro in doubt. Greece’s Prime Minister said Greece will run out of money in six weeks if they don’t honors the EU bailout deal.

France has elected a self-described Socialist who wants to dial back austerity and tax the rich.

Greeks, Italians, Spaniards, Portuguese and Irish face the highest unemployment rates in decades. The area suffers from debt, deficit, and lack of competitiveness. Germany is the better investment which has caused even more fiscal imbalance and consequent resentment.

Now it appears that Germans may have had enough –

NY Times:  BERLIN — Chancellor Angela Merkel’s party suffered a stinging defeat in Germany’s most populous state, one likely to embolden her opposition both at home and abroad as the European debt crisis enters a critical new phase.

One week after Socialists seized the French presidency, the Social Democrats won the parliamentary election in North Rhine-Westphalia, early results and exit polls released Sunday showed. Norbert Röttgen, the lead candidate for Ms. Merkel’s Christian Democrats in the state, conceded defeat and said he would be stepping down as the head of the party there.

Exit polls for German public television showed the Social Democrats winning 38.9 percent of the vote, an increase of 4.4 percentage points from two years earlier. While the results were not official, the party was likely to achieve a double-digit margin of victory. The Christian Democrats won just 26.3 percent of the vote, 8.3 percentage points less than in the previous election.

“This is a bitter day for us,” Mr. Röttgen told supporters. “We have suffered a clear and decisive defeat.”..

An orderly departure from the euro might be the only alternative.