Crunchtime for Merkel and Germany

The tide is running against Germany's chancellor, and a key vote is coming up.

By Jim J. Jubak Jun 15, 2010 4:33PM

Jim JubakThe government of German Chancellor Angela Merkel faces a critical vote on June 30. If it loses the vote, the country will be plunged into new elections just as German opposition to the euro debt bailout is near a peak.


There's some chance that a government opposed to bailouts for Greece, Spain, and Portugal could win those elections. And an even better chance that any Merkel-led government that survived would be much weaker. 


That could well send the eurozone back into crisis. (I'm no fan of the Merkel government or its policy of budget cuts for the eurozone's key economy, but I can't see how a weaker Merkel government or a coalition opposed to Germany's contributing to fix the euro debt crisis would help. For more on Merkel's proposed budget cuts, see this post).


The vote on June 30 to fill the slot that Horst Kohler left open when he resigned as president in May doesn't appear related to the euro crisis. The job is largely ceremonial, and it's filled by secret ballot by members of the German Parliament and representatives of Germany's states.


But the vote comes after a series of electoral defeats and political defections tied to the deep unpopularity of Germany's participation in the bailout of Greece and of the country's participation in plans to support other deeply indebted European countries.


The vote has thus taken on the stature of classic parliamentary test. A vote against Merkel's candidate Christian Wulff will be the equivalent of a no-confidence vote against Merkel's coalition government and its euro policy.


The tide is running against the chancellor. In May, her coalition of Christian Democrats and Free Democrats got trounced in elections in North Rhine-Westphalia, Germany's most populous state.


In addition to Kohler's departure, Merkel's government has witnessed the resignation of Roland Koch, the leader of Merkel's Christian Democrats in the state of Hesse. Koch will step down as state prime minister in Hesse in August.


Recent polls are against Merkel, as a majority of German voters surveyed doubt that her government will survive until the end of its term in 2013 without calling new elections.


Any new elections aren't likely to hand a clear-cut victory to Merkel's opponents, the Social Democrats. The most likely result would be that Merkel would have to patch together a new coalition government with less unity than the current alliance with the Free Democrats.


A weaker coalition government will be even less likely to lead in the euro debt crisis and will show even more reluctance to support plans to guarantee the debt of Portugal and Spain as those countries struggle to avoid going the way of Greece.


As to the June 30 presidential vote, it's Merkel's misfortune that her candidate, a rather colorless state leader, is opposed by Joachim Gauck, a former East German human-rights activist, who as overseer of the Stasi archives pursued the campaign to uncover the crimes of the East German secret police.


In a secret ballot, Gauck could well win support from representatives in Merkel's own coalition who nonetheless admire Gauck's role in opposing the East German regime.


When it rains, it pours. Or as they're saying in Berlin right now, Ein Ungluck kommt selten allein. It could mean trouble, in any language.


Jim Jubak doesn't own shares of any company mentioned in this post.  

0Comments

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

125
125 rated 1
264
264 rated 2
485
485 rated 3
679
679 rated 4
640
640 rated 5
617
617 rated 6
632
632 rated 7
493
493 rated 8
276
276 rated 9
153
153 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
TAT&T Inc9
VZVERIZON COMMUNICATIONS8
CTLCENTURYLINK Inc8
EXCEXELON CORPORATION8
AAPLAPPLE Inc10
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.