Merkel Coalition Doomed; Italy Exit Only a Matter of Time?

About a week ago I started exchanging emails with reader Bernd who lives in Germany. He claims that the anti-euro movement in Germany is far bigger than mainstream media lets on.

The question is who to believe, and I cast my lot with Bernd.

I have been down this path twice before, the first with reader "AC" who is from Italy and called the rise of Beppe Grillo a year before mainstream media ever mentioned the guy, let alone treated him seriously.

The second setup regards reader "Bran" who lives in Spain. Bran sends me most of the Spanish links that I translate.

Currently I am 2-for-2 on who to believe.

Nonetheless, let's first consider the other side of the story as presented in Tuesday's Eurointelligence  report offering the following comments on a recent German poll that shows 26% of Germans would back anti euro-party.

We want to caution readers not to translate the survey result by TNS-Emnid, according to which 26% of Germans would consider backing an anti-euro party, with the likely results to be achieved by the party that established itself this week – the “Alternative für Deutschland“, run by a group German professors and journalists. The TNS-Emnid polls also shows that the support for an anti-euro party among 40-49 year old is around 40%.

Reuters quotes Emnid chief Klaus-Peter Schoeppner saying an anti-euro party would only gain about 2 or 3% - as most of the anti-Europeans see themselves well catered for by the CDU and the FDP.

That’s our view as well. You already have plenty of true Eurosceptic parties in Germany. So why bother?

Why Bother? Really?

Eurointelligence thinks  the “Alternative für Deutschland“ AfD party will only get 3% of the vote because there are plenty of "true Eurosceptic parties in Germany".

Really?

Let's tune in to reader Bernd who writes ....

Currently Germany has 6 Parties in Federal Parliament: CDU, CSU, FDP, SPD, Green Party (Grüne), Left Party (Die Linke).

The current Government is made up of CDU/CSU/FDP under Chancellor Merkel.

CDU, CSU, FDP, SPD, and the Green Party are basically all promoting the same program, a mainstream nanny state agenda which is typical for Europe and for Germany. Their main thrust is towards a centralization of power in Europe to the detriment of the Germany, with the Euro being the conduit.

They seek to relinquish as much power to Brussels as possible as fast as possible. They are using the crisis of the Euro to bring this about. All these parties have voted for ESF and ESM with an overwhelming majority. Bailing out banks is also very highly on their agenda and is not up for discussion.

The parties differ in minor points. While SPD and Grüne promote an immediate introduction of Eurobonds with a complete disregard of the Maastricht Agreement, CDU/CSU/FDP promote a slower integration, with a possible return to the Maastricht Agreement and the no bail out clause, after the crisis is over.

The Left Party is against bailing out the banks, but otherwise they have a pure socialist agenda, coupled with a complete withdrawal of the German Army from all foreign activities. They also promote European Integration, even faster than the rest.

At this moment the German voter has absolutely no chance to voice his displeasure with the Euro/EU politics and policies. There is simply no party and no candidate with a program to reflect his desire.

49% of German voters are very displeased about current EU policies and about the pro Euro stand of our Government.

The new Party (AfD = Alternative für Deutschland), which is currently under formation will need 2000 signatures in each State of Germany to be admitted for the coming elections. This will not be a problem at all.

AfD has a clear program, but far beyond a single issue. The main point is a return to Maastricht, to “no bail out” and to the creation of a mechanism to exit the Euro in a legal and orderly fashion for all Eurozone members. It’s agenda also includes a clear position against lobbyists, the introduction of popular votes for major issues, and a popular vote for further integration into the EU.

The latest Emnid poll shows that 26% of voters are prepared to consider the new party and its program. Emnid is a very highly regarded and well reputed polling agency. It is almost certain – under these current circumstances – that AfD will be in the next Parliament with 10% of votes or so, if not much higher.

I still expect CDU/CSU to be the strongest single party. However, they will not be able to muster a majority with their current coalition partner FDP. FDP is actually in serious danger to fall below the 5% barrier. Current polls see them at 3%.

CDU/CSU will try to form a coalition with SPD, who might still come in second. SPD says that a coalition with CDU cannot be possible under Merkel’s leadership.

CDU/CSU might also try to form a coalition with the Green Party, who have not put up such a demand. However, I doubt that CDU/CSU/Green Party will have a majority.

More likely is a coalition of SPD/Green Party and Linke, however that coalition probably has too slim a majority to be stable.

All things considered, it will be very difficult to form a stable Government in Germany next time around. AfD has no power to form a coalition, but they may have the power to block a pro-Euro walk through by the other parties.

Throughout Merkel's career she has changed her opinion on many major matters at will. The one and only thing she stands for is the Euro and further European integration, but this go around that position is going to cost her votes. If CDU/CSU see a rise of the AfD with a serious number of voters largely from their pool of votes, you will see an anti-Merkel movement even inside CDU/CSU.

Expect unrest in the party prior to elections if polls in favor of AfD show any major support.

I think Merkel is in serious danger to not be the next chancellor. And yes, I think you could be the first to carefully speculate along those lines!

Best wishes
Bernd

Underestimating Backlash

Bernd's scenario sounds quite plausible to me, just as I believed "AC" regarding the rise of Beppe Grillo.

I asked Bernd for comments on the above Eurointelligence piece and he replied ...

"For Reuters to quote Emnid pollster Schoeppner with a statement that most anti-Euro Germans feel well catered for by CDU or FDP is outright unbelieveable. I doubt that quote is true, because it makes absolutely no sense at all. There is no indication that CDU or FDP has any room left for anti-Euro types."

Attempt to Stifle Discussion

In another email, Bernd offered these thoughts on “Alternative für Deutschland“

Mainstream media will do anything in their power to keep AfD out of any public discussion. Should that strategy not work, the media may spin a Neo-Nazi accusation which traditionally would be the death of any new party. However, the excellent names of the founders, and the fact that many of them are former CDU or FDP members makes that tactic highly risky.

In Germany, due to our history, you cannot win on a platform like Wilders in Holland or the Nationalists in Finland. AfD must always walk a fine line, never openly promoting a "Germany go it alone" strategy, or worse a "we know better" strategy. Change must be brought about in a civilized and democratic fashion. If they manage that, they will be fine. A mighty task ahead!

Four Time Bombs of the Chancellor

Via Google translate from Der Spiegel, Wolfgang Münchau writes Euro crisis: The four time bombs of the Chancellor

Until recently, everything went like clockwork for the Chancellor. ECB chief Mario Draghi had the euro crisis put an apparent end last summer - the purchase of government bonds calmed the markets. Merkel recommended Draghi as the savior of the euro.

The crisis is not yet returned to its full extent, but since the election in Italy, optimism has faded. We're back at one of these dangerous turning points. I see four possible developments  before the election that can be dangerous.

The greatest danger is currently out of Italy. The country is in a worsening recession and is paralyzed by a political crisis . To survive in the euro, Italy needs internal reforms and external concessions that Germany rejects. After my conversations there in the past week, the only hope for a modern and stable governments in the next five years in a generation change at the top of both major parties. The Partito Democratico is torn. Party leader Pier Luigi Bersani , who is now trying desperately to form a government, and his young challenger Matteo Renzi, Mayor of Florence, are bitter rivals. Between the two there is a gap of about two generations.

A euro exit of Italy only a matter of time?

There is a small chance that this generation succeed. Likely from today's perspective, however, is a new, non-democratically elected government of technocrats that will strengthen the radical forces in the medium term. In this scenario, it would amount to an absolute majority of Beppe Grillo's to anti-establishment movement. My interlocutors in Italy consider this scenario now for the more probable. Whether it actually comes to the promised referendum on the euro, is not clear. But it's not really important. From the current recession would mean a depression, because who is already investing in Grillo In this scenario, a euro exit would be Italy's only a matter of time. .....

The fourth risk for Merkel is the incumbent in this week's anti-euro party . I can see its not to the Bundestag, but certainly the possibility of success respect, the Union may cost valuable votes. The experience of the euro crisis shows that everywhere, even in Germany, a breeding ground for protest movements arose. And thus also the elections are unpredictable.

My forecast is that Merkel on Euro will fail politically. The question for me is only if this is done before the election or sometime thereafter.

Quite a Change

That is one hell of a change for Wolfgang Münchau who was optimistic about the Case for a grand coalition in Italy following the election.

I am aware that almost every Italian political expert says this is not possible because of the confrontational style of politics and dozens of other reasons. I respectfully disagree. Italian parties have no experiences of a grand coalition, so much is true. Then again, the German politicians who entered grand coalitions in 1967 or 2005 did not either. Grand coalitions are certainly not a good way to govern countries over long periods because they leave radical fringe parties thriving in opposition. A grand coalition would leave Mr Grillo as the effective leader of the opposition. But grand coalitions can work well for a finite, predefined period, say for one parliamentary term.

Münchau is co-founder and president of Eurointelligence which makes the Eurointelligence comment "You already have plenty of true Eurosceptic parties in Germany. So why bother?" all the more peculiar.

If I am not mistaken (but I cannot find the reference) Münchau was not worried about Beppe Grillo before the election.

Regardless, Münchau is now thinking clearly about the setup in Germany and Italy (in terms of what is likely), even though he objects to the idea.

The best hope now is to get everyone on board for a peaceful dismantling of this doomed-from-the-beginning experiment, or it is going to splinter in a dozen pieces in the worst possible way at the worst possible time.

Wine Country Conference

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http://globaleconomicanalysis.blogspot.com