Germany’s Coalition Talks Are Sowing The Seeds Of The Euro’s Breakup -

Germany’s Coalition Talks Are Sowing The Seeds Of The Euro’s Breakup

Oct 17, 2017Jeremy ParkinsonFinance0

For years now within Germany’s policy circles, there have been many who have pushed for an ‘expulsion’ or ‘voluntary exit’ mechanism for the Eurozone. I am now hearing this position advocated by FDP head Christian Lindner, a potential finance minister in the new German governing coalition. I believe this affects Italy the most and sets up an existential crisis down the line for the EU.

Thoughts below:

During the Greek crisis, there were many moments where I felt that Grexit was not just a possibility but a likelihood. One example is from 2012, when the Austrian and German foreign ministers backed explicit euro expulsion mechanisms.If this idea had become codified in EU law, Greece would have left the Eurozone. That was five years ago though.

Greece is still in the Eurozone. And Europe is in much better shape economically. Moreover, back in 2012, it was then-FDP head Guido Westerwelle who was proffering the eurozone expulsion mechanism as a solution to the sovereign debt crisis. The FDP was sent into the wilderness in 2013, out of the Bundestag altogether, paving the way for a CDU/SPD grand coalition government.

But the Grand Coalition was just voted out of power last month. And even though Chancellor Angela Merkel will retain leadership, her party suffered its lowest vote percentage since 1949, when an independent post-war German government was founded. With the FDP about to re-enter the German ruling coalition, we should recognize that the politics will change.

While the FDP were out of power, German Finance Minister Wolfgang Schaeuble took up the baton of advocating for euro expulsion mechanisms but was overruled by his party boss Angela Merkel and fell into line. With the FDP re-entering the German Bundestag and likely to be governing coalition partners again, the expulsion mechanism is back in play, without Merkel’s ability to overrule her party ally Schaeuble.

FDP head Christian Lindner, touted as the likely finance minister, is calling for a “voluntary exit mechanism” now as opposed to expulsion. Here’s how the political inner-workings in Germany are being described.