No Early Elections in Germany… But Almost?

In the Summer of 2011 I stuck my neck out and “predicted” early elections in Germany, ahead of the scheduled September 2013 deadline. I was wrong. However, and probably as a consolation gift to myself, I review some a sequence of events in the summer of 2012 that briefly appeared to set the coalition at odds with its leadership. Eventually events conspired otherwise, but who knows, may be it was closer than it seemed.

Either way, this failed prediction teached me something. Unless they have a good shot at increasing their share of the votes, junior coalition members will not break a government sooner than scheduled. That sounds obvious… Right?

In a previous post, I hypothesised that the federal CDU/FDP coalition government in Germany was likely to fall before the likely September 2013 deadline for the Bundestag (German federal chamber of deputies). This appears now very unlikely. So too bad for me.

However, it is interesting to notice that while my mistake is undeniable, I could have been right, indeed in the beginning of the Summer there were clear tensions between the CDU-FDP coalition partners, due to the bailout needs of Greece.

Starting on July 22th,   German rhetoric on Greece turns extremely negative with economics Minister Philipp Roesler predicting that Greece would most likely be unable to meet the goals agreed with its international lenders in a very open ended threat of default to Greece.

“I want to say this here very clearly: if Greece does not meet its obligations, there can be no further payments to Greece,” he stressed.

On July 24th, two further comments worsen the mood and hype fears. Horst Seehofer, the head of the CSU and Bavarian prime minister, tells the daily Bild in an interview that “we should not talk at all about a new aid package, and money from the agreed aid package must only flow if Greece fully meets its obligations.” Meanwhile, FDP secretary general Patrick Doering told the daily Passauer Neue Presse that “It could help to create confidence in markets if Greece were no longer part of the Eurozone,” “Greece can become more competitive and recover faster outside of the Eurozone,”

The day after, on July 25th, Rainer Bruederle, FDP parliamentary leader and former economics minister, adds to previous day’s negative outlook on Greece, stating that

One can talk about a few weeks or maybe a couple of months but surely not about a delay of two years (for Greece to meet its fiscal targets. (…) There will be no majority in the Bundestag  for additional aid for Greece

This is compounded by comments from the CDU/CSU parliamentary leader Volker Kauder who, on the same day, tells Bild that “there cannot be any further concessions [for Greece] neither on timing nor content.” Michael Meister, the deputy leader of the CDU/CSU parliamentary group, echoes the comment in an interview with the daily Rheinische Post: “If more time [for Greece] means more money, I think this won’t come about.”

As if all of this were not enough, on August 1stGerman Transport Minister Peter Ramsauer said in an interview with German ARD public television that Greece will have no alternative to leaving the Eurozone if it gets no further fiscal aid. After a 3 week hiatus, Bruederle reiterates the FDP’s opposition against any extensions for Greece to meet its bailout terms, on August 22nd.

However, this entire calamitous talk comes to an end on August 24th, when Merkel changes German rhetoric to more positive approach, signalling commitment to Greek membership of Euro-Zone and the end to discussions of iminent exit, stating

“We want Greece to remain in the euro area,” Merkel said, referring to herself and Hollande. Germany would support Greece in this endeavor

This shift in the discourse was not exclusively the result of Mrs Merkel’s leadership, despite it probably playing the crucial role. Instead, while her leadership and popularity allowed her to shut up the most vocal Greek critics within her coalition, Mrs Merkel was able to shift gears with the support of the ECB, whose President, Mario Draghi had hinted in no uncertain terms on July 26th at renewed (SMP?) intervention in Euro-Zone Bond markets following a week that saw Spanish Bond Yields rise above 7.5%. This eventually shapped into the OMT which were announced on September 6th, and compressed spreads in the Euro-Zone sovereign debt market.

I wonder whether in the absence of this monetary accommodation, Mrs Merkel would have been able to be so assertive over her minions. I suspect she would have been given here popularity and their lack thereof. Still if German support for the European project was what the Anglo-Saxon media made of it, things may have turned out as I expected. Ultimately the opposition within the government had their hands tied by their lack of support. After all the FDP’s support is so low, it is lucky if it even makes it to parliament in the next electoral cycle. Interesting to learn!

About these ads
This entry was posted in Media Coverage, Risk Scenario Analysis, Uncategorized and tagged , , , , , , , , , , , , , , , , , , , , , , , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s