Euro Crisis: On Pause Until German Elections? – Analysis


By Zachary Fillingham

When a news story has been dragging on for as long as the euro sovereign debt crisis, it’s easy for one to become desensitized to it and treat it like a looping highlight reel. But as tempting as it is to just go with the déjà vu and write off the constant stream of current events as unimportant, we shouldn’t give in to the urge. Why? Because in this case, the European Union is merely the sum of its democratic parts, and where there’s democracy there’s elections, so it doesn’t always matter what happens so much as when it happens; or rather, how near to this or that election. And when it comes to European elections, none cast a larger shadow than the German federal election slated for autumn of 2013.


Or to put it more succinct way: what happens between now and next year will influence the German election, and the results of the German election will decide the future of Europe.

Thus, the recent spike in mass demonstrations against austerity policies in Spain and Greece actually matters quite a bit. In the midst of a Greek general strike, 200,000 people marched through Athens on Wednesday and the demonstration eventually turned violent after police were attacked with firebombs. Spanish Prime Minister Mariano Rajoy is meeting with similar opposition in his own country as he quietly prepares the cuts that one would assume necessary for Spain to gain access to bailout funds. Demonstrations in Madrid turned violent on Tuesday after protestors attempted to form a human chain around the Spanish parliament. There are even rumblings that the independence movement in Catalonia may try to capitalize on current fiscal chaos and the looming threat of austerity, as evidenced by Catalonia president Artur Mas’s comments that a referendum should be held on Catalan independence.

The ongoing drama in Greece and Spain suggest that the war between stimulus and austerity is far from over. In fact, despite the positive macroeconomic signs of ECB head Mario Draghi green-lighting unlimited bond purchases and the German Supreme Court setting the stage for German participation in a Europe-wide bailout fund, the situation on the streets of various PIIGS countries gets worse and worse.

Many of these events are best viewed through the lens of how they will affect next year’s federal election in Germany. The results of this election will provide a mandate for the future of Europe, whether it is to forge ahead with ever greater integration or start the dismantling of one of the most ambitious political projects the world has ever seen.

If the election were held today, Angela Merkel’s Christian Democratic Union (CDU) would come away with an easy victory, but the lingering question is who the CDU would form a coalition with. Their current coalition partner, the business-friendly Free Democratic Party, has been progressively trounced in the polls since entering into the ruling coalition in 2009. Thus, the CDU may be compelled to enter into a “grand coalition” with the main opposition Social Democratic Party (SDP) in 2013. This would have the effect of pulling German euro policy towards the left, with the likely result being more debt subsidies for the PIIGS with less austerity strings attached.

That Chancellor Merkel finds herself in such a charmed position in the polls is largely due to the fact that she has maintained a relatively hard line towards underwriting euro debt with German money. And while this line seems to resonate with the German voting public, it can’t last forever, if only for the simple truth that the institutional framework holding up the euro needs to be fixed if it is to ever become a viable international currency. Doing so will require decisiveness and a firm German commitment one way or another; and given the fact that austerity is still decimating the Greek economy to the tune of a 6.5 percent annualized rate of contraction, this final decision in the future may not be congruent with the hard line on austerity that Merkel’s CDU plans on riding to electoral success in 2013.

Thus, it seems likely that a final decision on Europe will only come after German federal elections in 2013. Until then, the German government will try to keep the ship afloat with stopgap measures such bond-purchases by the ECB. Austerity may also become a word that is mentioned less and less as the German government becomes wary of creating widespread disillusionment towards the European project by flaunting a concept that, for reasons outlined above, may not prove fundamental in a future plan to rescue the euro. To this end, it’s interesting to note that it isn’t the German government that’s driving a hard bargain on Greek austerity cuts ahead of the next tranche of troika funds, but rather the IMF.

Now all that remains to be seen is whether Germany can hold it together until elections in 2013.

Zachary Fillingham is a contributor to

Geopolitical Monitor is an open-source intelligence collection and forecasting service, providing research, analysis and up to date coverage on situations and events that have a substantive impact on political, military and economic affairs.

2 thoughts on “Euro Crisis: On Pause Until German Elections? – Analysis

  • September 30, 2012 at 10:45 am

    I use the term “fictitious capital” to describe what the Big Bankers, public and private, are attempting to inflict on the ordinary 99% people who through their entrepreneur led labour create ALL REAL value, capital included.
    In the middle of the 19th century Karl Marx coined this term to describe the notes and loans that governments and gentry used to finance wars, luxuries, estates and otherwise living beyond their REAL means.
    At that time such paper would accrue during “Boom” times as the economy expanded and would usually max out at around 10-12% of a countries GDP. As long as the good times rolled on it was not a problem, but came a crisis of over production (of all the wrong things) there would be the day of reckoning. Ergo, the bill collectors came and cash not paper promises was the order of the day. This resulted in a variety of ways to settle, some were paid in part or in full but more often bankruptcies and swindles resulted. Then the stage was set for the next cycle – boom bust.
    Today though the situation with ‘ficticious’ or ‘counterfeit capital is vastly different.
    100 years of pumped up growth for growths sake first based on the now discredited ideas of John Maynard Keynes has produced a situation where some 20 times the worlds gross product exists as fictitious capital, a counterfeit collection of deficits, bills, bonds, exchanges, derivatives, swaps and the latest fraud, “quantitive easing”. (Le Monde Diplomatique puts it at 50 times)
    Every day we read of new Central and Private bank meetings, “Increasing capital base” is their current fad.
    OFF THE WALL! There is not a farthing of REAL capital in all of this ratbag of lies, swindles and manipulations.
    REAL capital is ONLY accumulated labour dedicated to enhancing future production. Ergo entrepreneur led LABOUR (of the 99%) is the only source that can augment existing capital or create new.
    The banksters, led by the IMF, USA FED, and British “financial services” are well aware of this fact but that will not stop them from attempting to download this fraud onto the REAL product of Labour in the form of “bailouts” of “sovereign” debts, to be serviced by taxes on the REAL producers.
    The 99% will be robbed of (much prepaid) social services and benefits to sevice “debts”. Austerity it is called when those who had NO hand in running up this fraud are required to pay interest that will amount to 40-60% of the future product of their labour. Gone will be pensions, good schools, decent medical care, infrastructure (e.g. utilities that work reliably); even adequate diets will be history.
    “Let them eat cake!” exclaimed La Royale Marie Antoinette.
    Let them eat garbage, implies La Grande Dame Christine LaGarde, of the International Monetary fascists(IMF)
    So Greece, you are the front line today, Italy and Spain may be next, but do not think that any country, including the relatively well off Germany or the resource rich Canada and Australia will be forever exempt. Ms MERKEL, BEWARE! YOU ARE NOT FOREVER SAFE from the BANKSTERS!! The super productivity of the German working class has to be a priority target for the swindlers!
    The “poor little ones” are but appetizers who will whet the appetites of these financial service vultures and jackals. For certain if they succeed at the start the taste of financial carrion will make them hunger for more, and they will finish only when the 99% of humanity is subject as debtors to enslavement by 1%.

    But his does not have to be! Greece you can repudiate the fraud! Lead the way! DEFAULT is the way to go!
    99% be inclusive! Support Greece today, Italy Spain, &c. tomorrow and…?? the world in future.
    Hold on to your souls!
    You have a WORLD to WIN!!

  • October 5, 2012 at 6:42 pm

    I like the comment as much as I like the article. Good choice Eurasia Review! You are worth reading if you attract commentators like David Tarbuck (a person I do not know, nor am I his friend or related to him in ANY way)


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