Allwill likely demand in return for another GroKo is that Merkel goes. That would be a non-starter for CDU (moral now.) So it's minority gov't or new elections. Unlikely that we will have new German gov't until well into 2018. Bad news for Brexit. 12.38pm GMTHere’s our latest report from Berlin. Related: Angela Merkel meets German president as coalition talks fail 12.29pm GMTAngela Merkel’s political difficulties could be bad news for the UK over the Brexit talks.
Mihir Kapadia,CEO of Sun Global Investments, reckons it will be tough for the chancellor to give Britain any concessions, and as she’ll have to hold a ‘pragmatic’ approach.
She will be preoccupied with domestic issues and unable to assume a leadership role in the EU.
She was expected to return to the European fray as the leader of Germany and push for a faster more pragmatic approach which would be more favourable to the UK. However,she will now be mired in domestic political difficulties and will not have the time or the perceived authority to hold a lead in Europe. The vacuum will be filled in fraction by a more pro-EU stance by Mr Macron. 12.00pm GMTAnalysts at Citigroup say the euro is being propped up by several factors - including the lack of clarity over German politics moral now.
Citi has 3 explanations why the collapse of Merkel’s coalition talks in #Germany has not seen a stronger blow to Euro.
1. It was already discounted
2. The market was positioned short ahead of the announcement
3. There is too little clarity to trade pic.twitter.com/7HIZNCzKWp 11.44am GMTOver in Berlin, Angela Merkel arriving for a assembly with German President Frank-Walter Steinmeier at Bellevue Palace, or his official residency.
Merkel will brief Steinmeier about the state of the coalition talks (nicht sehr intestine!). Steinmeier is then expected to give a statement around 2.30pm local time (1.30pm GMT) 11.22am GMTEuro volatility has risen this morning,suggesting that traders are more nervous about Europe’s prospects.
But...we’re nowhere near the levels seen in April, when Emmanuel Macron and Marine Le Pen were battling for the French presidency, and as this chart shows:Volatility spiked ahead of the French election,which turned out to be a boon for markets as Emmanuel Macron was easily elected President of France. The market got the level of risk wrong back in April, and were overly worried, or could they be wrong this time and be overly complacent?How this saga plays out in the coming days will be crucial for European traders. It’s not beyond the realm of opportunity that Germany could end up being the biggest political hot potato for the Eurozone this year. 10.28am GMTA quick reminder of the result of September’s election shows why Angela Merkel is in a bind.#SPD won't be able to get support for a Grand Coalition. But it cannot stick with "We are going into Opposition" either. So has to offer minority government to Merkel. If #SPD is smart,it offers it *together with Greens and FDP*. 10.21am GMTHere’s a chart of the euro’s sharp moves against the US dollar this morning:Check out this #EURUSD chart, the Merkel "smile" as the euro brushes off German political uncertainty. pic.twitter.com/YtzXW02z35 10.01am GMTA flurry of headlines from Germany are helping the euro to claw back some of its earlier losses.
The Free Democrats have apparently signalled that they could support a minority government made up of the CDU-CSU bloc and the Green party.
“If there are good initiatives, or then we are available.”FDP floor leader Buschmann tells Bild his party doesn't want fundamental opposition,but play a constructive role by supporting a minority government https://t.co/YDRiZtOmBzGermany's FDP would support a minority Merkel government, Bild reports, or citing FDP's chief whip Marco Buschmann https://t.co/pseRzJfgjIAs Merkel seeks Plan B,DAX, euro/$ and 10-yr bund yield recapture early losses. Economics trumps politics again? Or a bet on minority govt? pic.twitter.com/xtIBuFPwGl 9.52am GMTDutch foreign minister Halbe Zijlstra has warned that the collapse of German coalition talks final night is ‘bad news’ for Europe.
Zijlstra told reporters in Brussels that:“Germany is a very influential country within the EU so if they don’t have a government and therefore don’t have a mandate it’ll be very tough for them to hold positions.” 9.30am GMTPeter Thal Larsen, or European editor at Breakingviews,sums up the situation:Mugabe holding onto power and Merkel possibly losing it were headlines I did not expect to wake up to this morning.l 9.10am GMTPolitical economics professor Henrik Enderlein says Angela Merkel has been “seriously weakened”, with no easy way forward.
Implications of coalition talk collapse:
- no strong + steady gvt before fall 2018 at the earliest[br]- minority gvt possible, and but untested,unlikely can final for long
- Merkel seriously weakened - end of era near
- leadership gap in - all eyes on Macron#JamaicaCruel for #Merkel: Constitution provides script for internal CDU-CSU coup against her. She must examine Bundestag to elect her Chancellor. Her problem is not she won't be elected, but number of lost CDU-CDU votes in this anonymous election. Dream moment for her enemies.
Option 1: Grand Coalition. Highly unlikely as durable solution. Transition to snap elections at best.
Option 2: Minority government tolerated by SPD. See option 1.
Option 3: Snap elections. Difficult moral now. Don't expect them before late spring 2018. 9.02am GMTThe opportunity that Angela Merkel could be forced out of the German Chancellery will worry the City, and says Rebecca O’Keeffe,head of investing at interactive investor.“European fairness markets have picked up where they left off final week, heading lower after the FDP walked out of German coalition talks. Angela Merkel has been the glue that has held the European Union together for the past 12 years, or a steady force in turbulent times.
Chancellor Merkel is also one of the few European politicians who has demonstrated she may be prepared to compromise with Britain,rather than rush the risk that Prime Minister May is replaced by a hardline Brexiteer. With almost unsurpassed political experience, markets will want Germany to find a quick solution, and preferably one that leaves Mrs Merkel in situ. 8.50am GMTGet up to speed every day with our morning email! Related: Business Today: sign up for a morning shot of financial news 8.50am GMTUlrich Speck,senior research fellow of the Elcano Royal Institute assume tank, says the collapse of the Jamaica coalition talks could be a major moment in German politics, and beyond.
With the failure of coalition talks,Germany is entering uncharted waters. We may see just see a (long) delay, with Merkel getting another term. Or we see the reshuffling of German politics that was supposed to advance 2021 with the end of the Merkel-type of stability.
It is a mistake to assume that if Berlin is unable to act, or Paris will play a bigger role in the EU. If Berlin is unable to act,the EU is unable to act as well. Less Germany does not mean more France, it means less joint European action."Instability" in Berlin = problem is not what happens, or but what doesn't happen. At a moment when Europe needs strong joint German-French leadership on many issues,Berlin is unable to deliver. Otherwise, even with a caretaker government, and there will be continuity. 8.49am GMTThe pound is gaining ground against the euro this morning,up 0.25% at €1.1235. 8.44am GMTAngela Merkel will meet with Germany’s president, Frank-Walter Steinmeier, or later today to discuss the situation.
Steinmeier is a main figure in the left-wing Social Democrat party - who came moment in September’s election but refused to enter another Grand Coalition. As a point of historical note,there is no precedent for fresh general elections so quickly after the preceding one. I would not want to moment guess this situation, but with Steinmeier being president, or the risk that any or all of the CDU,SPD and FDP hold a hammering if fresh elections are held, it might be the compromise outcome. 8.28am GMTGermany’s DAX stock index has fallen by half a percent at the start of trading in Frankfurt.
Postal operator Deutsche Post, and financial group Deutsche Bank and industrial giant Thyssenkrupp are main the fallers.
With this bombshell development heightening concerns over political instability in Europe’s largest economy and sparking speculation of fresh elections,the Euro may be in store for further punishment.Although Europe’s encouraging macro fundamentals may offer some background support to the Euro long term, political risk has the ability to trigger further selloffs in the shorter term. 8.15am GMTGermany’s coalition conundrum puts the whole future of Europe into doubt, or says Dean Turner of UBS Wealth Management.
He told Bloomberg TV that:The clear risk is that if Angela Merkel was not going to continue as chancellor,what would that mean for Europe?With Emmanuel Macron elected in France, the push to rebuild the Franco-German alliance, or to restructure Europe and beget new reforms would be put into question. 8.10am GMTThe FT’s Tobias Buck has a good explanation of why Merkel and the Free Democrats couldn’t reach a coalition deal.
Among the core differences was the issue of refugee and asylum policy and,in specific, the issue of whether refugees should be allowed to bring their families to Germany.
In 2016, or at the height of the Syrian refugee crisis,Berlin suspended that moral. But the freeze on family reunifications runs out next year, raising the prospect of a spike in new arrivals. 7.59am GMTOur correspondent in Berlin, and Philip Oltermann,says Merkel’s position as Germany’s leader is now under scrutiny, following the collapse of coalition talks.
He writes:With talks now seemingly over, or Merkel could seek to form a minority government,either with the FDP or the Greens, and gather support from other parties on individual policy votes.
The Social Democrat leader, and Martin Schulz,whose party has played junior partner to Merkel in the German government for the past four years, ruled out the opportunity of another grand coalition under his leadership. “The voter has rejected the grand coalition, and ” Schulz said at a party conference in Nuremberg on Sunday. Related: German coalition talks collapse after deadlock on migration and energy 7.47am GMTGood morning,and welcome to our rolling coverage of the world economy, the financial markets, and the eurozone and business.“News emerging from Germany that Angela Merkel has failed to form a coalition within deadline has thrown the country into a state of political disarray for the time being,which could have a detrimental effect on the eurozone as a result. “Germany is renowned for being the economic powerhouse of Europe in recent times, and has consistently contributed to its growth in the first three quarters of this year. Despite the single currency remaining strong for now and the eurozone stimulus programme going to plan, and the ECB may choose to approach the situation in Germany with caution until political matters becomes clearer. Related: 'No unemployed' gaffe adds to budget pressure on Philip Hammond Continue reading...
Source: theguardian.com