Merkel Coalition About to Splinter Over Creation of "European Monster State"

Winning the Summit but Losing the War

German chancellor Angela Merkel was the EU Summit Winner. She gave next to nothing to Italy and France, and a pittance to Spain.

However, there was a price to that pittance, and it could cost Merkel dearly. Please consider German Party Leader Threatens To Axe Coalition

Chancellor Angela Merkel faces growing resistance to her European policy from within her own coalition. Horst Seehofer, the leader of the powerful CSU party, sharply criticized the outcome of last week's EU summit, and threatened to let the coalition government collapse if Berlin makes any more concessions to ailing euro members.

Bavarian governor Horst Seehofer, the leader of the conservative Christian Social Union party (CSU) which is part of Chancellor Angela Merkel's center-right federal government coalition, has criticized the outcome of last week's European Union summit and threatened to let the government collapse if Berlin makes any further financial concessions to ailing euro member states.

"The time will come when the Bavarian government and the CSU can no longer say yes. And I wouldn't then be able to support that personally either," Seehofer said in an interview with Stern magazine released on Tuesday. "And the coalition has no majority without the CSU's seats."

The CSU is the Bavarian sister party to Merkel's Christian Democratic Union.

Germany's billions of euros in aid and guarantees were already "borderline," said Seehofer, who is known in Germany for his combative, occasionally populist style. "My biggest fear is that the financial markets will ask: Can Germany cope with all that? That is the point I regard as the most dangerous of all."

'European Monster State'

Seehofer also criticized a suggestion by Finance Minister Wolfgang Schäuble that Germany should hold a referendum on a new constitution that could relinquish national powers to Brussels. "Hands off our constitution! We have this constitution to thank for the most stable state and the most stable democracy there has ever been in German history. We don't want a different constitution," said Seehofer.

He said he wouldn't accept the transfer of major powers to a "European monster state." He said he would turn the next general election and the Bavarian regional election, both scheduled for 2013, into a vote on Europe. "We will put this question to the people."

End of the Line

Merkel has given the minimum each step of the way. However there have been too many give-aways to count. Each cave-in, no matter how small, has had a cumulative effect. Each time she makes a concession, she adds risk of an adverse ruling in the constitutional court or risk of increased political fallout.

Her latest pre-planned escapade in Brussels puts her at risk of both.

The constitutional court already had the ESM under review. Additional challenges will be filed. I suspect the court will OK the treaty but with a stern warning. And speaking of stern warnings, CSU party leader Horst Seehofer just issued one in no uncertain terms.

This may be the end of the line of what Merkel can agree to without a referendum. When yields head North again in Spain and Italy (and they will because nothing has been solved), Merkel will be in serious trouble.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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