“Merkel Will Have To Go”: Bill Blain On What’s Next For The Germans

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"Merkel Will Have To Go": Bill Blain On What's Next For The Germans

Credit Dylan Martinez/Reuters

Originally appeared at Zero Hedge

 “When you turn an election into a three-ring circus, there is the possibility the dancing bear will win..”

After Sunday night’s shocking failure by Merkel to from a government (triggered by the Free Democrats walking out due to irreconcilable differences on refugee policy, energy policy and tax policy) the FT was quick to conclude that “Merkel faces worst political crisis of her career.” And while Merkel is certainly in hot water, a more appropriate question is what’s next for Germany.

According to UBS – which has a clear interest in preserving the calm – there are four possible scenarios:

  • First, Chancellor Merkel could try to re-engage with the FDP and bring it back to the table and start coalition talks.
  • Second, the CDU/CSU could try to approach the SPD to form a grand coalition, which would have an absolute majority. However, the SPD has repeatedly mentioned (again last night) that it is not willing to go for this option and prefers to be in opposition.
  • If these two options do not work (which would be the first time in post-war Germany), either a minority government (Chancellor Merkel dismissed this option on election night) or new elections could follow.

The procedure for new elections, however, involves several steps, as outlined below.

The current (grand coalition) government remains in place until a new government is formed, i.e. until parliament votes on a candidate for chancellorship proposed by the Federal President (for which there is no time limit). If no workable coalition can be found, the way towards new elections involves many steps as reported in the press. The Federal President Steinmeier must propose a candidate for chancellorship (normally, this is the candidate put forth by a majority coalition, but he is free to choose others) and parliament would vote on this candidate. If the Federal President’s candidate does not obtain an absolute majority (which has never happened before in post-war Germany), parliament has 14 days to propose and vote on a candidate in a second round. If in this second round of voting no candidate obtains an absolute majority, there is a third round of voting where a candidate can be voted as chancellor with only a relative majority. If a candidate is voted with only a relative majority, the Federal President can either appoint the candidate as chancellor (implying a minority government) or dissolve parliament. In the latter case, new elections have to take place 60 days after parliament has been dissolved. At this stage, however, it is unclear whether new elections would
produce a significantly different result compared to the last election.

To be sure, UBS’ view is that no matter how bleak Merke’s “crisis” looks, the fallout will likely be limited, to wit:

“even though the EUR dipped on the breakdown of the Jamaica talks, the broader market reaction has been contained. With Merkel’s acting government remaining in place, big political decisions on Brexit and EU issues anytime soon appear more difficult, including at the December Euro summit. If the grand coalition no longer remains an option, this could, in our view, lead to some risk-off pressure, the negative fallout for periphery markets (and a wider risk-off) should be contained.”

Perhaps: for UBS’ “calm and collected” outcome to be validated, the ECB may be forced to become more actively engaged in micromanaging risk again, something few have discussed yet.

Which is why for a more practical and unbiased take we turn to Mint’s Bill Blain, who back in September correctly predicted just this eventuality, when everyone else said the odds are negligible. Here is Bill Blain with his take on “What’s next for the Germans.”

Ha. Macron must be creasing himself with laughter… I bet he struggled to keep a straight face as he commiserated with the (soon to depart?) Angela… Funny how the good news is all French these days…

And in Harare/Berlin an elderly befuddled leader doesn’t know if they are coming or going.

Despite triggering of Gotterdammerung, market reaction to the German electoral talks collapse is curiously muted – the Euro taken a minor spanking, and stock markets a tad-let lower.

I’m not really surprised at the lack of fireworks. Markets have become blasé about political noise – understanding how easy it is to over-react. It’s going to be a short holiday week, its year-end and folk are protecting what they’ve made this year. As one heads westwards, interest or cares in German politics diminishes pretty quickly? It’s just something that happens – Isn’t it?

Er.. actually…. what’s going on in Berlin is pretty important stuff. Or, at least it should be…

I’m trying to get my head round what happened and what cracked – it’s important to understand the collapse to work out what happens next… Last week chums in Berlin assured me it was a just a matter of time before Muti Merkel signed a new coalition deal. Over the weekend it all came apart.

It would seem the Greens and the Liberals just didn’t fancy the compromises and potential electoral suicide pact that underlies being Merkel’s stooges.

Back in September I warned the coalition process was likely to be far more difficult and fraxious than the market expected. I even said the chances of an outright failure to agree were as high as 50% – check out Porridge Extra Sept 25th. I was told I was a know nothing idiot (not disputing it!). But, I didn’t expect crisis this soon. My worst case was a second election triggered early next year – and Merkel squeezed out.

I’m going to spend some time talking around contacts and putting together some new scenarios, but I’m struggling to find much upside.

I suspect Merkel will have to go. The outlook is for a complete re-jig in German politics; out with the old, and in with something new(er). New coalition discussions or an election will be equally drawn out. A new administration could be vulnerable, weak and uncertain as the “leader of Europe” is entirely inward focused in coming months/years.

Don’t underestimate the sentiment effects on Europe. Who is going to lead the agenda re closer union, banking union and reform of the ESM, bailout and QE policies? And what about dealing with Putin, Italian elections next year, the inevitable Greece bailout blow up, renewed immigration crisis, Brexit, a blow-up with Trump, and a Frenchman to replace Draghi at the helm of the ECB looking increasingly nailed-on.

And I reckon the young emperor in Paris, Macron, is going to be disappointed – if he see this as his chance to re-establish French leadership at the core of Europe, he may be well disappointed. If Berlin doesn’t care.. who’s interested?

Perhaps not – Yoorp is a long-game.

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  • Tudor Miron

    Germans, a proud nation (in the past) are becoming a joke due to treacherous politicians that do all they can to feminize, “multiculturalize” and ultimately weaken their own people to transform them into consuming (while they are allowed) biomass. Democracy my a$$…this farce is not funny anymore.

    • Barba_Papa

      In all fairness, Germany is facing a demographic timebomb with too few births and an aging population. In that sense I can understand that politicians have opted to let a lot of immigrants in. More European countries face that problem.

      What I do blame the politicians for is lying to us about this. About not telling us this up front, not giving us a choice in whether or not we should let in a shitload of immigrants, and lying to us that these supposed refugees are temporary, when we all know they will be permanent immigrants. And that we’re not even bothering to screen immigrants. And by that I don’t mean check for their ISIS membership cards, but as to what kind of immigrants do we actually want, if we want any. Preferably well educated, from a non-Muslim background. Not because I hate them, but they have a history of not integrating very well in Western society.

      • goingbrokes

        Immigration is out of control, just as the corporate elite and Bidebergers want. It is used to weaken nations to a point where every country is mired in internal social conflicts and there is no longer national unity on anything, not even on the financial future and control of their own wealth. Robber barons.

        • John Brown

          Yes.
          Europe has a demographic decline because it has an anti child policy dictated by the racist supremacist global Jewish confederate slave empire. With no immigration at all there will be massive unemployment in all advanced countries due to automation and artificial intelligence. It is a total lie that more workers are needed to support the elderly as caring for the elderly will be one of the few jobs machines can’t do where people will have jobs.
          Regular reports warn us that an automation apocalypse is nigh. In January, a McKinsey & Company study found that about 30% of tasks in 60% of occupations could be computerized and last year, the Bank of England’s chief economist said that 80m US and 15m UK jobs might be taken over by robots.
          https://www.theguardian.com/us-news/2017/jun/26/jobs-future-automation-robots-skills-creative-health

      • John Brown

        Europe has a demographic decline because it has an anti child policy dictated by the racist supremacist global Jewish confederate slave empire. With no immigration at all there will be massive unemployment in all advanced countries due to automation and artificial intelligence. It is a total lie that more workers are needed to support the elderly as caring for the elderly will be one of the few jobs machines can’t do where people will have jobs.
        Regular reports warn us that an automation apocalypse is nigh. In January, a McKinsey & Company study found that about 30% of tasks in 60% of occupations could be computerized and last year, the Bank of England’s chief economist said that 80m US and 15m UK jobs might be taken over by robots.
        https://www.theguardian.com/us-news/2017/jun/26/jobs-future-automation-robots-skills-creative-health

    • Solomon Krupacek

      you, as russian better do not laugh on them. you are more and more alcoholic, aids morbidized, drugged. more and more leave russia and the income is only moslem.
      germany is flourishing country, russia poor, declining country. gernmenas each decade give hindreds of technmical innovations, scientific observations for the menkind. russian nothing.

      • Kim Jong

        Delete your account.

        • Solomon Krupacek

          i delete your bastard family, commie

      • Brother Ma

        You solomon from czechoslovakia and israel can speak freely as both your countries have NOT had to accept these headchoppers.

        Only when you do,can you preach to us about how good it is to have such.

        As for police state ,israel is a police state more than russia methinks.

  • Serious

    After Merkel, Merkel 2.0. Germans have “democracy”. XD.

  • heydrich

    A real civil war In israHELL against zionists is on the horizon , not a staged proxy militants-foreigners-terrorists’s from overseas abroad false civil war , a real civil war against zionists in israHELL to liberate arab Palestine from zionists-terrorists’s occupation is immenent underway !

  • Real Anti-Racist Action

    In order to understand what has happened to the ethnic indigenous Germanic tribes to get to this disgraceful dishonorable point, one must first understand the true history, and not the propaganda of the anti-Christian UK, USSR and USSA empires that together conquered the world.
    http://ihr.org/sites/default/files/Final2.jpg

  • Brother Ma

    I love how the world is trying to get more modern women on boards in business in politics etc

    I think it has been a disaster. As far i can remember ony indira gandhi has succeeded, thatcher nailed the lid on the coffin of british industry and prestige in the world by becoming usas bitch.

    Theresa may is another yesman who signed everything zioyanquis tell her.

    Isabella of spain was one of first women euro leaders to kick headchoppers out of europe and merkel will go down in history as the woman traitor who brought them back in!

    And why……simply to do uncle sams bidding!