Greek bailout backtrack would split German government

2015 ◽  
Keyword(s):  
Euro Area ◽  
Debt Relief ◽  
Party Leader ◽  
Single Currency ◽  
Social Democrat ◽  
German Government ◽  
Content Type ◽  
Christian Democratic Union ◽  
Finance Minister ◽  
Christian Social Union

Significance The prospect of the euro-area extending Greece another bailout, to keep it in the single currency, has opened differences between Merkel and Finance Minister Wolfgang Schaeuble; a split in the Christian Democratic Union/Christian Social Union (CDU/CSU); tensions between the CDU/CSU and its Social Democrat (SPD) coalition partner; and SPD unhappiness about party leader and Economy Minister Sigmar Gabriel. Impacts Schaeuble is unlikely to exit government. His continued presence binds in a significant share of CDU/CSU MPs unhappy over Greece policy. A split in AfD is likely to divide the popular eurosceptic vote and keep Merkel's greatest anti-bailout problem an intra-party one. Intra-CDU/CSU opposition to further concessions to Greece restricts Merkel's leeway in euro-area negotiations Nominal debt relief for Greece will thus remain a 'red line' for the German government, straining relations with France. With Gabriel remaining a weak and controversial SPD leader, the question of who could challenge Merkel in 2017 looms large.

German parties are preparing for early elections

2019 ◽  
Keyword(s):  
Democratic Party ◽  
Economic Conditions ◽  
Social Democratic Party ◽  
German Government ◽  
Content Type ◽  
Social Democratic ◽  
Christian Democratic Union ◽  
The Social ◽  
Christian Social Union ◽  
One Year

Subject Update on the German government. Significance Just over one year after the grand coalition between the Christian Democratic Union (CDU), its Bavarian sister party the Christian Social Union (CSU) and the Social Democratic Party (SPD) was renewed, all three parties are preparing for its breakdown by sharpening their profiles. Impacts Conflicts between the coalition parties may deepen if deteriorating economic conditions force hard budgetary choices. Chancellor Angela Merkel’s international influence is likely to decline as her domestic position weakens. Low poll ratings could moderate the parties’ desire for early elections.

Greece to seek end of austerity, not euro membership

2015 ◽  
Keyword(s):  
Public Sector ◽  
Euro Area ◽  
Economic Hardship ◽  
Debt Relief ◽  
Credible Commitments ◽  
Content Type ◽  
Political Constraints ◽  
Greek Government ◽  
Domestic Political Constraints ◽  
The Eu

Significance Greece's government and voters have delivered a punishing blow to euro-area policies. However, the underlying dilemmas remain unchanged: whether creditors will countenance debt relief, whether the Greek government can produce credible commitments on reform, and whether euro-area leaders can manage their domestic political constraints and divisions. Impacts Without European assistance, Greece faces a period of economic hardship as funds dry up to pay public-sector salaries and pensions. Without ECB liquidity injections to keep the banks operational, they will require recapitalisation. A bail-in of depositors is possible. Otherwise, a raft of bankruptcies is expected among businesses unable to acquire operational financing. The referendum result will encourage anti-austerity eurosceptics elsewhere in the EU.

German election results point to three-party coalition

2017 ◽  
Keyword(s):  
Political Capital ◽  
Lower Saxony ◽  
Far Right ◽  
Content Type ◽  
Christian Democratic Union ◽  
Election Results ◽  
Christian Social Union ◽  
Alternative For Germany

Significance However, the result is overshadowed by the heavy losses her Christian Democratic Union (CDU) and its Bavarian sister party, the Christian Social Union (CSU), incurred and a surge in support for the far-right populist Alternative for Germany (AfD). Impacts Coalition negotiations will only start in earnest after the regional election in Lower Saxony on October 15. A CDU/CSU-FDP-Greens coalition means that the centre-left SPD rather than the AfD will lead the opposition in parliament. Neither Merkel nor the FDP are likely to use their political capital to push for a more accommodating German or EU stand on Brexit.

Germany’s CDU looks set for modest shift to the right

2020 ◽  
Keyword(s):  
Euro Area ◽  
Far Right ◽  
Political Fragmentation ◽  
Content Type ◽  
Christian Democratic Union ◽  
German Politics ◽  
Regional Branch ◽  
Good For ◽  
The Right ◽  
Alternative For Germany

Subject CDU leadership race. Significance On February 8, Annegret Kramp-Karrenbauer announced she would resign as leader of the Christian Democratic Union (CDU) after the party’s regional branch in Thuringia defied party rules to vote with the far-right Alternative for Germany (AfD). Her resignation reopens the question as to whether the CDU continues with Chancellor Angela Merkel's pragmatic course after she steps down, or whether it will take a more conservative direction; it also raises the possibility of a snap election. Impacts Deepening political fragmentation will make it increasingly difficult for the CDU to maintain its policy of not cooperating with the AfD. German politics will become more domestically focused in 2020, thereby slowing progress on issues such as euro-area reform and EU defence. Kramp-Karrenbauer’s leadership was underwhelming, so her resignation may be good for the CDU if a more authoritative leader replaces her.

Germany to wait out major EU decisions until post-2017

2015 ◽  
Keyword(s):  
Euro Area ◽  
Debt Relief ◽  
French Elections ◽  
Content Type ◽  
Greek Crisis ◽  
Eu Referendum ◽  
The Uk ◽  
Party Family ◽  
The Imf

Significance The Greek crisis has exposed Germany's euro-area dominance more clearly than ever -- to both Germany's partners and Germany, and to the discomfort of both. Merkel's decisions in the crisis have reflected in part her wish to buy time until after the 2017 German and French elections, and her belief in the continuing importance of the Franco-German relationship. Impacts Belying German hopes the three-year Greek deal will buy time until after 2017, October could see a new clash over debt relief and the IMF. Given the alternatives in Paris, Merkel will hope more strongly than usual for a new French president from her own party family. Waiting for stronger leadership in Paris could risk fuelling French eurosceptics' charges that France lacks influence. Seeing major 'future EU' initiatives only after the 2017 German and French polls, Berlin would like the UK EU referendum also over by then. Germany's wish to postpone major EU reforms will limit the scope of any pre-referendum deal with London.

Caribbean debt initiatives highlight disaster impact

2015 ◽  
Keyword(s):  
Debt Relief ◽  
Caribbean Island ◽  
Content Type ◽  
Poor Countries ◽  
Island States ◽  
Finance Minister ◽  
Economic Commission ◽  
Heavily Indebted Poor Countries ◽  
The Caribbean ◽  
Hipc Initiative

Subject Multilateral debt relief options. Significance At the Third International Conference on Financing for Development, the UN Economic Commission for Latin America and the Caribbean (ECLAC) presented a proposal for multilateral debt relief for Caribbean island states. Barbados's finance minister, Chris Sinckler, has since called for the region to be granted no less favourable debt relief than that made available under the Heavily Indebted Poor Countries (HIPC) Initiative in the 1990s. Impacts Caribbean countries cite debt reduction as indispensable to tackle both socioeconomic stability and global risks such as climate change. However, securing broad support for debt reduction will be difficult. The question of conditionality will be a vexed one.

Euro-area/Greece deal will not avert Grexit risk

2015 ◽  
Keyword(s):  
Economic Policy ◽  
Euro Area ◽  
Single Currency ◽  
Content Type

Significance The agreement testifies to the wish of all parties to avoid a euro-area breakup. It averts the risk of Greece's immediate exit from the single currency. However, the risk of Grexit remains. The deal involves Greece accepting restrictions on its economic sovereignty, and the euro-area aligning with the tough conditionality demanded by Germany and other 'hawks'. Parliamentary rejection in Greece and/or by prospective creditors might yet upend negotiations on a new bailout. Impacts The crisis has damaged Germany internationally, because of the tough line it has taken, and strained Franco-German relations. The ECB's status as a politically independent institution is likely to be damaged however Greece-creditor relations develop. Eurosceptics are likely to gain from the demonstration of the extent of economic policy sovereignty loss required by euro-area membership.

Spahn could emerge as Merkel’s main challenger

2018 ◽  
Keyword(s):  
Euro Area ◽  
Health Minister ◽  
Content Type ◽  
Christian Democratic Union ◽  
The Right

Subject Profile of Jens Spahn. Significance Health Minister Jens Spahn is the leading representative of a growing faction within Chancellor Angela Merkel’s Christian Democratic Union (CDU) that wishes to return the party to its conservative roots. He has proven adept at capturing the electorate’s attention but several issues could plague him. Impacts Spahn’s conservative positions could alienate centrist voters. Should he be successful, the CDU would join those traditional centre-right parties across Europe that have edged further to the right. Success for Spahn would hinder EU and euro-area reform, given his stridently hawkish stance.

All sides set conditions for Greek debt breakthrough

2017 ◽  
Keyword(s):  
Developing Countries ◽  
Debt Relief ◽  
Investment Bank ◽  
Content Type ◽  
The Third ◽  
Finance Minister ◽  
Private Investors ◽  
European Investment ◽  
First World ◽  
The Imf

Significance The IMF insists that Greece’s debt must be made sustainable before it will again participate in programme financing. Yet IMF participation is required if the bailout plan is to proceed, German Finance Minister Wolfgang Schaeuble says; the Fund and the euro-area remain at odds over debt relief. Greece will need the next loan tranche by June to make debt repayments in July to private investors, the ECB, IMF and European Investment Bank. Impacts Germany, which faces federal elections this September, will accept no further debt relief until after the third bailout has concluded. The IMF is under pressure from developing countries to end its involvement in financing a first world EU member state. The package being finalised will probably not encounter any serious resistance from within the ruling Syriza party.

Banking union in a single currency area: evidence on financial fragmentation

2015 ◽  
Vol 7 (3) ◽  
pp. 251-274 ◽  
Author(s):  
Diego Valiante
Keyword(s):  
Data Analysis ◽  
Euro Area ◽  
Financial Integration ◽  
Institutional Design ◽  
Home Bias ◽  
Banking Union ◽  
Single Currency ◽  
Content Type ◽  
Currency Area ◽  
The Impact

Purpose – The purpose of this paper is to assess the impact of the impact of the single currency on the institutional design of the banking union, through evidence on the financial integration process. Design/methodology/approach – Data analysis uses multiple sources of data on key drivers of financial fragmentation. The paper starts from a snapshot the status of financial integration and then identifies the main components of this trend. Findings – Evidence shows that financial integration in the euro area between 2010 and 2014 retrenched at a quicker pace than outside the monetary union. Home bias persisted. Under market pressures, governments compete on funding costs by supporting “their” banks with massive state aids, which distorts the playing field and feed the risk-aversion loop. This situation intensifies frictions in credit markets, thus hampering the transmission of monetary policies and, potentially, economic growth. Taking stock of developments in the euro area, this paper discusses the theoretical framework of a banking union in a single currency area with decentralised fiscal policy sovereignty. It concludes that, when a crisis looms over, a common fiscal backstop can reduce pressures of financial fragmentation, driven by governments’ moral hazard and banks’ home bias. Research limitations/implications – Additional research is required to deepen the empirical analysis, with econometric modelling, on the links between governments’ implicit guarantees and banks’ home bias. This is an initial data analysis. Originality/value – Under market pressure, governments in a single currency area tend to be overprotective (more than countries with full monetary sovereignty) towards their own banking system and so trigger financial fragmentation (enhancing banks’ home bias). To revert that, a common fiscal backstop is an essential element of the institutional design. The paper shows empirical evidence and theory, as well as it identifies underlying market failures. It links the single currency to the institutional design of a banking union. This important dimension is brought into a coherent framework.

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