After strong performance for the last 3 months as investors around the world turn their eye towards Europe as the hot-money inflow area for clean dirty shirt macro tourists, the core of Europe's hope, Germany, has seen its equity market stumble a little recently. Since Monday alone, the DAX is down 2%, underperforming such stalwart economies as Spain and Greece. The reason, aside from international money flows and "war-" and "Taper"-premia, appears to be worries that Merkel may be losing popularity. After 17 million watched the German debates on Sunday night, opinion polls show Merkel's opposition, Peer Steinbruck, surged in popularity...
Via Open Europe [6],
The debate only briefly touched on the Eurozone crisis and EU policy, with Steinbrück criticising Merkel’s policy over Greece in particular. Though some Anglo-Saxon commentators have written this up as the SPD candidate “criticising austerity” , in fact, he was more criticising the pace of austerity and its balance with more 'growth orientated' policies – not austerity itself.
As we've argued before, you just don’t criticise Sparpolitik in Germany – next to plagiarism, this is the best way to end a mainstream political career. Steinbrück did, however, criticise the pace and scale of Merkel’s austerity policies, again repeating his calls for an as yet very vague new “Marshal Plan” for Europe. “There must be budget consolidation”, he said, but must not be “a deadly dose”. Merkel hit back, saying that if, as Steinbrück claims, the need for a third Greek bailout is a sign of her Eurozone policies failing, why did he and his party vote in favour of all the bailouts so far?
So who won the debate?
The view in the German media and commentariat seems to be pretty unanimous that though the debate itself was pretty much a draw...
However, Steinbrück saw a major boost to his head-to-head ratings. An ARD poll has a massive swing in favour of Steinbrück on the question: who would you vote for if the Chancellor could be elected directly?
[7]
So is that what is spooking the long-term bulls that their money-fairy Merkel may not be as beloved as everyone assumes?