Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
THEY DON'T RING THE BELL AT THE CRPTO MARKET TOP! - 20th Dec 24
CEREBUS IPO NVIDIA KILLER? - 18th Dec 24
Nvidia Stock 5X to 30X - 18th Dec 24
LRCX Stock Split - 18th Dec 24
Stock Market Expected Trend Forecast - 18th Dec 24
Silver’s Evolving Market: Bright Prospects and Lingering Challenges - 18th Dec 24
Extreme Levels of Work-for-Gold Ratio - 18th Dec 24
Tesla $460, Bitcoin $107k, S&P 6080 - The Pump Continues! - 16th Dec 24
Stock Market Risk to the Upside! S&P 7000 Forecast 2025 - 15th Dec 24
Stock Market 2025 Mid Decade Year - 15th Dec 24
Sheffield Christmas Market 2024 Is a Building Site - 15th Dec 24
Got Copper or Gold Miners? Watch Out - 15th Dec 24
Republican vs Democrat Presidents and the Stock Market - 13th Dec 24
Stock Market Up 8 Out of First 9 months - 13th Dec 24
What Does a Strong Sept Mean for the Stock Market? - 13th Dec 24
Is Trump the Most Pro-Stock Market President Ever? - 13th Dec 24
Interest Rates, Unemployment and the SPX - 13th Dec 24
Fed Balance Sheet Continues To Decline - 13th Dec 24
Trump Stocks and Crypto Mania 2025 Incoming as Bitcoin Breaks Above $100k - 8th Dec 24
Gold Price Multiple Confirmations - Are You Ready? - 8th Dec 24
Gold Price Monster Upleg Lives - 8th Dec 24
Stock & Crypto Markets Going into December 2024 - 2nd Dec 24
US Presidential Election Year Stock Market Seasonal Trend - 29th Nov 24
Who controls the past controls the future: who controls the present controls the past - 29th Nov 24
Gold After Trump Wins - 29th Nov 24
The AI Stocks, Housing, Inflation and Bitcoin Crypto Mega-trends - 27th Nov 24
Gold Price Ahead of the Thanksgiving Weekend - 27th Nov 24
Bitcoin Gravy Train Trend Forecast to June 2025 - 24th Nov 24
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Will German State-level Politics be Felt Throughout the Euro-zone?

Politics / Euro-Zone Mar 29, 2011 - 02:18 AM GMT

By: Victoria_Marklew

Politics

An upset in the regional election in one of Germany's 16 states could be expected to generate reams of newsprint in the local press, but wouldn't normally have implications for the continent's energy sector or for EU-level plans to support the financial sector. However, we live in unusual times and the surge in support for the Green party in Baden-Wuerttenberg will have consequences far beyond the borders of Germany's third-largest state.


It appears that the Green Party surged to about 25% of the vote in Baden-Wuerttenberg, more than doubling its share in the last vote in 2006, and leaving it well placed to head a coalition with the Social Democrats (SDP), who took around 23%. The Christian Democrat (CDU) party of German Chancellor Angela Merkel did still win the largest share of the votes at 39%, down from 44%, but the national coalition ally FDP barely managed to pass the 5% threshold needed to claim seats. At a combined 44% the center-right came in behind a Green-SDP alliance. Claiming over a third of the votes in a state of 11 million may not seem all that bad, but for the CDU the result is being seen as a rout.

The loss occurred in one of the country's most prosperous states, the heart of the Mittelstand - the medium-sized, export-oriented industrial companies that have underpinned Germany's economic success in recent years - and a state that has been dominated by the CDU for 58 years. In contrast, the Green Party is clearly on the ascendant. The Greens had performed well in the regional election in Saxony-Anhalt earlier this month and are also heading for an alliance with the SDP in Rhineland-Palatinate (both states where the FDP failed to pass the 5% threshold). Now, they anticipate heading a German state government for the first time.

Politically, Merkel is unlikely to be brought down by the result - there is no viable alternative leader waiting in the wings of the CDU, and the partner FDP has been so weakened in Baden-Wuerttenberg and elsewhere that it will be in no hurry to bring down the national coalition. The state's outgoing CDU premier tried to point out that environmentalists had already been mobilized by public opposition to the giant Stuttgart 21 railway project in the state capital, and that the vote was not necessarily a referendum on the national party. However, it adds to the perception of a weakened national government in disarray. Merkel had already lost her majority in the Bundesrat or upper house, where the 16 states are represented, and gains for the opposition will make it that much harder to pass any controversial legislation.

The result will have an impact on Germany's energy sector. Back in 2001 the then-SDP-led national government had passed legislation to start winding down the nation's nuclear power program from 2022. Last fall, Merkel's government extended the life of the nation's seventeen reactors by another 12 years. Then, in the wake of Japan's nuclear crisis, the Chancellor abruptly declared a three-month moratorium on that extension, the immediate closure of the seven oldest reactors, and an urgent review of the entire program. However, the move did not win her any political points but was instead seen as evidence of a national government driven more by opinion polls than by clear policy priorities. European energy prices jumped today as analysts warned that the victory of anti-nuclear sentiment in Baden-Wuerttenberg - home to two of the oldest reactors - may mean permanent closure of the seven plants and probably jeopardizes any extension of the life of the other plants past 2022.

Having received a body-blow in Baden-Wuerttenberg, Merkel will be unlikely to take risks over the ongoing Euro-zone negotiations over how to beef up the European Financial Stability Facility (EFSF). A much-touted summit late last week was supposed to confirm that the EFSF's lending power would be increased by expanding the national guarantees given by AAA-rated countries to back the Facility. It was also supposed to firm up the details on the permanent European Stability Mechanism (ESM) that will replace the EFSF from 2013. These decisions were effectively scuppered by Finland's electoral calendar. A general election is due in that country on April 17. With the Finnish parliament now dissolved, any decision on increasing the EFSF's lending capacity can only be taken by the next legislature. As a result, the EU's leaders had to delay final approval on how to increase the EFSF's lending power to the end of June. The picture is further complicated by the fact that the populist True Finns party, which opposes increasing the national guarantee and is demanding that the whole program be re-negotiated, has been enjoying a surge in support in recent months and could well hold the balance of power in the next parliament.

Meanwhile, Merkel had already insisted that the timetable for paying into the ESM be extended over a period of five years, rather than making bigger payments in a shorter time period - likely a way to give her government more fiscal room to potentially cut taxes before the federal elections scheduled for 2013. With the government now further weakened, Merkel will be even less inclined to take any EU-level decisions that could generate negative headlines in the national press. Once again, grand EU designs could be undone by national political considerations.

By Victoria Marklew
The Northern Trust Company
Economic Research Department - Daily Global Commentary

Victoria Marklew is Vice President and International Economist at The Northern Trust Company, Chicago. She joined the Bank in 1991, and works in the Economic Research Department, where she assesses country lending and investment risk, focusing in particular on Asia. Ms. Marklew has a B.A. degree from the University of London, an M.Sc. from the London School of Economics, and a Ph.D. in Political Economy from the University of Pennsylvania. She is the author of Cash, Crisis, and Corporate Governance: The Role of National Financial Systems in Industrial Restructuring (University of Michigan Press, 1995).

The opinions expressed herein are those of the author and do not necessarily represent the views of The Northern Trust Company. The Northern Trust Company does not warrant the accuracy or completeness of information contained herein, such information is subject to change and is not intended to influence your investment decisions.

Victoria Marklew Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in