Germany’s Government Loses Influence At Home And Abroad

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September 24, 2018 6:05am NYSE:EWG

From John Rubino: You don’t see “Germany” and “ungovernable” in the same headline very often. But that might be about to change, as Chancellor Angela Merkel, for the past decade the central pillar of Europe’s Establishment, loses influence both at home and abroad.


First came a wave of populist (read anti-euro, anti-austerity, anti-immigration) gains across Europe, culminating with an actual victory in Italy’s most recent election. Then came the rise of Germany’s own populist movement, Alternative for Germany, or AfD, which has become a legitimate power in some parts of the country.

And now Mekel has apparently lost control of her cabinet. From yesterday’s New York Times:

As the Far Right Gains in Germany, Merkel Weakens

BERLIN — For nearly two weeks Chancellor Angela Merkel tried to find a way to fire her own domestic intelligence chief, a man who had publicly contradicted her and become the darling of the far right for questioning the authenticity of a video showing angry white men chasing an immigrant.

But she couldn’t — not without risking the collapse of her fragile government.

Where to now? The NYT article’s last sentence gives a clue:

“Mr. Seehofer’s party, [Merkel’s coalition partner] the Christian Social Union, has been veering sharply to the right ahead of state elections in Bavaria next month, trying to fend off a challenge from the AfD, which is on course to deprive it of its absolute majority.”

Centrist coalitions faced with a non-mainstream challenge have two choices: Either bring in new partners from the other end of the spectrum (in this case the left) or co-opt the right wing populists by adopting some of the latter’s policies. The Christian Social Union has apparently chosen door number two.

That pulls the central government towards the populists’ point of view, which might be healthy, since unlimited immigration is clearly failing. Or it might be destabilizing since a dominant, pro-European-integration Germany is all that’s keeping the “European Project” on track at the moment.

And let’s not forget that all this is happening in the context of soaring debt and peripheral country banking crises (Italian banks only exist because of ongoing ECB bailouts while Spain’s banks are on the hook for 5% of GDP lent to Turkey) that could easily spread to the core. The current global expansion, meanwhile, is now the longest on record and ought therefore to end shortly.

In other words, big, probably negative changes are coming even with a stable German government. Let Germany descend into political turmoil and the difficult becomes impossible. Get ready for a massive euro devaluation.

Some other posts in this series are here.


The iShares MSCI Germany Index Fund ETF (EWG) was unchanged in premarket trading Monday. Year-to-date, EWG has declined -7.39%, versus a 9.86% rise in the benchmark S&P 500 index during the same period.

EWG currently has an ETF Daily News SMART Grade of B (Buy), and is ranked #34 of 90 ETFs in the European Equities ETFs category.


This article is brought to you courtesy of DollarCollapse.com.


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