September 23: The Beginning Of The End For Merkel... And The Eurozone?

Tyler Durden's picture

Update: sure enough, here is Ambrose Evans-Pritchard with his own perspective on just this topic, which is oddly comparable to Zero Hedge's: "Mrs Merkel's aides say she is facing "war on every front". The next month will decide her future, Germany's destiny, and the fate of monetary union."


Every time we discuss the futility of the nth bailout of [Greece\PIIGS\Europe\the Euro] we make it all too clear (most recently here and here) that the trade off between Germany onboarding ever more peripheral financial risk in one after another all too brief attempt to prevent the implosion of European capital markets and its currency, is not only a relentless creep higher in German default risk (and lower in the German stock market, as August has so violently demonstrated) but increasing political discontent, which after claiming countless political regimes across the world, has finally settled down on one that truly matters: that of German chancellor Angela Merkel. And as Reuters reports, Merkel's disappointing response to an ever escalating set of crises, both domestic and international, means that the beginning of her end (and by implication of the Eurozone, and of the Euro) may be as soon as September 23, when the vote over the expansion of the latest and greatest European bailout lynchpin, EFSF, will take place.

To wit: "Germany's Angela Merkel faces the biggest challenge to her leadership since coming to power in 2005, with traditionally loyal conservative allies openly criticizing her approach to the euro zone crisis and her hands-off Libya policy in is Merkel's piecemeal approach to the euro zone's worsening debt crisis that has come under fire over the past week and now threatens her iron grip on power in Germany." The biggest problem for Merkel is that she has gone "Japanese" in the opinion of the public: doing neither nothing, nor enough, to halt the European crisis in its tracks: "For some in Germany, she has gone too far by bailing out stricken euro zone members and agreeing to intervention in the bond markets to prop them up. For others at home and abroad, she has not done enough, shirking bold steps that might solve the debt crisis because they would be unpopular at home." This latest attempt to placate everyone, while achieving precisely the opposite, will come to a head on September 23 when the vote to expand the EFSF takes place: she is for the time being expected to have a sufficient number of votes to pass the critical for the eurozone proposal. "If it's not enough, Merkel would be forced to resign. It would lead to a crisis." And should there be a crisis, it will be the end for the European experiment as well, since with the political situation at the Euro's biggest financial backer in flux, the free fall in European risk will be one that no one, certainly not the ECB, will be able to arrest. Cue even more improvised bailouts by the central banker oligarchy, yet without Germany, the credibility of any and all such deseprate measures will be nil. This incremental political uncertainty will likely make the life of the FOMC's Sept 20-21 meeting slightly easier, as an adverse monetary announcement by the Fed, contrary to that priced in, coupled with the risk of a full blown European crisis, will be very frowned upon by the Status QuoTM.

From Reuters:

Seen for much of the past six years as a reliable, steady leader whose competence and knack for brokering deals made up for a lack of bold vision, Merkel's image has taken a beating over the past months and polls show an increasing number of Germans view her government as directionless.


The chancellor's troubles can be traced back to two decisions taken in March, when she abruptly dropped her long-standing support for nuclear power in the aftermath of the Fukushima disaster in Japan, and days later backed Germany's abstention from a U.N. vote authorising military action in Libya.


Coming shortly before a crucial state election, which her conservatives subsequently lost, the steps looked to many in Germany and abroad like cynical political ploys to placate domestic opinion.


For some in Germany, she has gone too far by bailing out stricken euro zone members and agreeing to intervention in the bond markets to prop them up. For others at home and abroad, she has not done enough, shirking bold steps that might solve the debt crisis because they would be unpopular at home.


This conflict will come to a head next month.


Merkel's coalition has a comfortable 20-seat majority in the lower house of parliament. But if she is hit with dissent in her own ranks, and is forced to rely on opposition parties to pass legislation to expand the single currency bloc's rescue mechanism -- the European Financial Stability Facility (EFSF) -- then her coalition could collapse, sparking early elections.


"The euro crisis entered a new phase over the past week," influential German weekly Der Spiegel said on Sunday.


"Before the main question had been how the common currency could be saved. Now it is also about saving Merkel's chancellorship. If her coalition does not deliver a majority for the enhanced euro rescue mechanism in the autumn, people close to the chancellor say, the coalition is all but finished."

On the significance of September 23:

The chances of Merkel failing to secure her own majority in the EFSF vote, which is likely to take place on Sept. 23, still seem slim.


Her Christian Democrats (CDU), hovering at a weak 30 percent in opinion polls, have little incentive right now to bring forward an election that is not scheduled to take place until the autumn of 2013.


Merkel's conservative bloc -- composed of the CDU, Bavarian Christian Social Union (CSU) and Free Democrats (FDP) -- has shown discipline in previous euro zone aid votes, with only a handful of lawmakers rebelling.


"I expect she will get majority backing from her own coalition," said Gerd Langguth, a political scientist at Bonn University and biographer of Merkel, putting the number of dissenters at around fifteen.


"If it's not enough, Merkel would be forced to resign. It would lead to a crisis. No one is interested in an early election."

Slim... but getting bigger:

Critical voices from within the party have grown louder over the past week, with senior CDU lawmaker Wolfgang Bosbach vowing publicly to vote against the EFSF increase and popular Labour Minister Ursula von der Leyen -- seen as a potential successor to Merkel -- wading into the euro zone debate with comments that went against official policy.

Helmut Kohl enters the frey:

Perhaps most damaging of all, however, was former Chancellor Helmut Kohl's rare public criticism of his protege last week. Kohl plucked Merkel out of obscurity in East Germany after the fall of the Berlin Wall in 1989, bringing her into his cabinet and helping to launch one of the most unlikely and astonishing political careers that Germany has ever seen.


In an interview with newspaper Internationale Politik, Germany's longest-serving post-war leader and father of reunification broke his silence and unleashed a broadside against Merkel's foreign policy, saying it lacked direction and risked undermining Germany's global influence.


"The enormous changes in the world can be no excuse for having no view or idea where you belong and where you are going," Kohl, 81, said.

Yet not even the EFSF vote will do much to help Europe if the German economic implosion (documented here, here and here) continues. Should her own GDP not rebound, it won't matter one bit whether Merkel succeeds in sending the PIIGS to unseen economic golden ages.

However the biggest threat to her hold on power, should she survive the EFSF vote next month, could be the slowing German economy. Data over the past two weeks showed that Europe's biggest economy ground to a virtual halt in the second quarter of the year.


Business confidence plunged this month by its largest amount since shortly after the bankruptcy of U.S. investment bank Lehman Brothers in 2008. Some economists now see the risk of a recession in Germany.


The country's robust rebound from the global economic downturn of 2008/2009, and sinking unemployment, was one asset Merkel thought she could count on heading into the next election.


Now that support is crumbling too, wiping away some more of the magic that she exuded in her first years in office, when she was celebrated in Germany and abroad as the "Gipfelkoenigen" -- or Summit Queen -- for brokering deals with in the EU and G8.


"Her downfall may not come from the euro crisis, but simply from the fact that she has lost the shine, the sure footing that she had at the start," said Josef Joffe, editor of German weekly Die Zeit.

At the end, should Merkel drop out of the picture, and Europe be left with finding scraps of capital everywhere else it can, we can't wait for the ensuing hilarity as the future of a failed European experiment then proceeds to be a burden on the far narrower shoulders of one (AAA-rated) Nicholas Sarkozy.

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Mongo's picture

Good riddance

dogbreath's picture

yup  the sooner the better

Josh Randall's picture

Out with the B!tch, Bitchez!

russki standart's picture

Disagree. Merkel will survive and Germany will bail out the other european countries one more time. Thereafter, it is over since the resultant debts will overwhelm the system. 

spiral_eyes's picture

Does anyone remember what happened the last time Germany were forced into pledging vast amounts of cash (or “reparations”) to other European nations? No?

It wasn’t pretty.

Hitler, bitchez

cynicalskeptic's picture

The German people are acutely aware of their past history.  They will not allow a repeat.  Germany overcame much to rebuild - after WWII and after reunification.  Its people went throught much and they do not wish to lose what they now have.

Americans, on the other hand, are all too oblivious to their own history and - being blunt- are rather spoiled.  They have lived far beyond their means for some time and resent the intrusion of reality into their sheltered lives.  The US populace has already tolerated (barely questioned) marked limitations on their rights and liberties.  They have already gone to war on false pretenses and violated international law on many levels without any serious debate on those actions much less legal accountability. Some have openly voiced their support for military action against countries with oil reserves if it guaranteed the cheap gasoline they have grown accustomed to. A growing extremist faction has enthusisatically supported leaders who  blame others for their problems and promise a return to ''better times' taking the name of Jesus on a regular basis in doing so -  Sinclair Lewis' "wrapped in a flag and carrying a cross"personified.  With a middle class terrified of losing the little they have accumulated and an economic melt-down guaranteed to make their situation even more perilous, and a corporate owned media that keeps the public dumb and uninformed, the US is ripe for a 'strong leader' who promises everything - in exchange only for a national committment to his cause and unquestioned support from the populace.


spiral_eyes's picture

I concur.

I still think shoehorning Germany into paying for the PIIGS is a very, very bad idea though. They are a proud and dignified people. They shouldn't have to clean up everyone else's mess. I see the geldmark on the horizon... 

Joebloinvestor's picture

The beginning of the end started when the EU refused to implement its' own bylaws and refused to boot or suspend Greece.

Showed the investing world that EU whims meant more then bylaws.


Sudden Debt's picture

She'll bend like a figure scater and fuck the rest of Europe like a nympho.

It will happen.

Look at what's happening in Greece last week, not many noticed but the 2 biggest banks already merged.

What we will start to see from this point on it more mergers all over Europe UNTILL WE GET ON BIG ASS BANK that is under control of the Oliargs.


rbsx's picture

You forget, the rest of Europe deserves to get fvcked for their poor decision making.l

Sudden Debt's picture

what decision making?


DoChenRollingBearing's picture

Ha ha!  So true our Belgian friend!  Made my afternoon!

StychoKiller's picture

Speaking of which, what news re:  Belgian Govt?

Snidley Whipsnae's picture


Govs, all govs, put off decisions as long as possible. This is done in the hope that the problem goes away, or resolves itself, so that no decision is necessary.

When a decision absolutely, unavoidably, has to be made we get a cluster flock like we witnessed with the 'debt ceiling debacle'...

The pols abhore decision making... it interferes with their T times and reelection bids...

disabledvet's picture

but who's gonna run this "mystical meglomaniacal mega bank?" the nympho figure skaters? .... Possibly. It'll have to be one of those "behind the scenes" things though. I don't think we'll want them "running to the Euro Congress" demanding "further bailouts of the Olympic Committee" however. People might actually pay attention and agree.

Problem Is's picture

Obama Bin Lyin'

Barry Soetoro is on the run as the Wall Street Owned Puppet watches the Bankster class implode what is left of the real economy and prepare to pay themselves huge $144 Billion bonuses (More than 1% of GDP) with taxpayer loot again...

CREEP 2012: Committee to RE-Elect the President
The mobs of unemployed, foreclosed on and hungry will man the pitchfork and torch brigades and go after the Bullshit Barry Campaign Bus...

Town hall teleprompter hilarity will ensue...

sun tzu's picture

Barry's Chicago mob union goons will keep them away. Pitchforks and torches are no match for guns and knives

Fuh Querada's picture

@ sudden debt

Great. Can you provide a cartoon to illustrate your hypotheses?

snowball777's picture

I'm trademarking that. Big Ass Bank : "We've Got Money...Out the Ass". We'll use Beyonce for the ads.

James's picture

And Beyonces ass is about to get bigger.

She's pregnant.

Real Estate Geek's picture

I always knew that there was a fat girl in there crying to get out.

props2009's picture

Lots of charts on US, EU and China. Perfect sunday read before trading begins.

Transitory Disinflation's picture
Something to add to the mix....... 7 Reasons This September Should Scare the Crap Out Of You



mfoste1's picture

women have proven they should not be involved in politics.....

SILVER_GIRL's picture

well... man really proved they should be in politics... we can see very clearly the state of things... ha ha

eisley79's picture

lol, funny but

dont fall for his tricks.  He just wanted to see if there were any girls posting on zero hedge, so he can creep their profiles.  ROFL

Thomas's picture

Yeah. The guys did a peachy job.

Shylockracy's picture

Mörkel can hardly be classed a human being, let alone a woman; a soulless apparatchik puppet is more like it.

WVO Biker's picture

Which is the cheapest way out of this for Germany?

Germany is finished and we now need Eurobonds and an end to sovereignity, rather there must be a European government and a new united European state. The german sheeples that are opposed to this don't take to the street in any numbers, the others don't understand the implications or don't care. The situation can no longer be turned back at this point.

Tschüss, Deutschland. I will be happy to be a European.

DoChenRollingBearing's picture

@ WVO, we'll be watching.  You provide an interesting take.  Touché!

disabledvet's picture

Start with Poland. Stay close with the Americans this time.

Shocker's picture

No one inspires to be in Politics

James's picture

Nor do they aspire too

Problem Is's picture

"women have proven they should not be involved in politics....."

You mean ball less eunuchs like Shark-ozy and
Obama Bin Lyin' ??

Smithovsky's picture

Does anyone have a good opinion on how far down the EDX will go once it finally dawns on the market that this single-currency experiment has failed? 

Greed's picture

The foreign view on german politics is often interesting, but sometimes lacks the necessary understanding of the political culture.

As you might know, renegades are a very seldom species in the Reichstag. In fact it is common to articulate differing oppinions before a poll, but extremely rare to vote against the own party once the time has come. It will be the same this time.

Anyhow, please do not forget the fact that the opposition is on course to back Mrs. Merkels position, even if it is just because they cant sport any alternative. There are no votes to be won for the opposition by blocking the EFSF. 

Gunther's picture

Normally the German MP's vote party line - no question. This time I am not so sure, they must have heard unpleasant things from the voters in their ridings.

Voting to guarantee money amounting to almost one year of federal budget is something to question party line more then usual.

Moreover, the opposition states that they want monetary union and the like but will NOT let the opportunity go to get the Merkel government out of power.


disabledvet's picture

At least in the USA they fund an actual and existing federal government before they agree to bankrupting the individual states. Indeed--the composite states have no voice in this process. Why any state in Europe would agree to bankrupt itself for a chance to climb "the Misty Mountain" is beyond me.

drider's picture

The Germans have done crazier things in the past including setting off to conquer the world.

Anyway, the reality is that if you want to lead you have to take risks (and yes even debts). 

Look in the future for signs of Americans increasingly withdrawing from global geopolitical affairs... 

disabledvet's picture

As we collapse at home we do the exact opposite abroad. Wait till we blame our debt on all of you! Then you'll see our ANGRY face!

Jack Sheet's picture

The Greens, who are likely to get over 20% of the votes in the next German general election in 2012, love that warm fuzzy feeling that comes from solidarity with, and bailouts of,  the  brothers and sisters in the southern EU, and their voters (still)  have high enough incomes to support this laudable moral stance. The SPD has come out strongly in favor of Eurobonds, if only out of principle to counter Murkle. The FDP has become peculiarly silent after strongly opposing the bailouts, mainly because they may not even get the 5% of votes necessary to stay in the Bundestag in 2012. The normal citizen doesn't know dick about all the economic stuff (just like anywhere else), and couldn't tell a Eurobond from a bondage video. So whether Murkle stays or goes, it will make no difference.


Larry Darrell's picture

"The normal citizen doesn't know dick about all the economic stuff (just like anywhere else), and couldn't tell a Eurobond from a bondage video."

They will learn the difference in time.

With the video, they watch someone else enjoy getting abused.

With the bonds, they will not enjoy getting abused themselves.

scratch_and_sniff's picture

 I would go even further, if she goes, the socialists come into the frame, and then if they dont play ball its even better again for the Euro, as Germany are the only ones procrastinating about the Eurobond, when really, they aren’t needed. Even without Germany, the combined size of the Eurobond market would be bigger than Japans and only marginally smaller than the US. Germany would be left out in the cold again, the WCS for them, and the only reason the Eurozone was started in the first place. So, pinning the future of the entire Eurozone on Merkle convincing her right-wingers to fund the south is a moot point. Just another chapter in the "Euro about to collapse any second now, any second..." freak show. It wont be pretty, but it will just be another hurdle to get over; people underestimate how far the Euro has come and how much effort that has been put into it, that’s one thing the bears cant get their heads around.

Religion Explained's picture

Nah, you don't have to wait till Sep 23. When the German court decides on the legality of the past bailouts on Sep 7th, that's when the fireworks start and you better not get caught long.

Shylockracy's picture

Exactly my thoughts, but you may recall that the Bundesverfassungsgericht is a political court whose judges are appointed by the parties. Its single purpose is to maintain the status quo, so it is very unlikely they would rock the boat with anything as démodé, ideologically repellent and politically incorrect as an affirmation of the German people's right to self-determination, or the German state's  sovereignity.  The BvG is ideologically committed to the progressive dissolution of the German state and nation in the European sulphuric cauldron.