German Chancellor Angela "Frau Fritz" Merkel has headaches enough forming a governing coalition, despite the breathless admiration some American commentators expressed for her 42% plurality vote.
But the southern eurozone governments that her euro policies depend on obediently following Frau Fritz' austerity demands are finding that their voters aren't so thrilled about have their own well-being sacrificed for the comfort and convenience of the German One Percent.
Italy's government is having a new crisis, with a real possibility of new elections which could give even more clout to the anti-austerity Five Star Movement. The Democratic Party-led government has called for a vote of confidence on Wednesday, October 2. If the government can't get some defectors from Silvio Berlusconi's People of Freedom Party (PDL) to vote for them, the President would presumably call for new elections. They previously had a caretaker government forced on them by Frau Fritz, and it wasn't too popular. To put it mildly.
Italy was in the news recently for high losses on derivatives in which the government had invested. The Italian financial conglomerate Mediobanca also recently warned that Italy would likely need some sort of EU bailout in the near future. Italy is the third-largest economy in the eurozone. Wolfgang Münchau points out that the eurozone emergency fund (ESM) simply doesn't have enough money to cover what such a rescue of Italy would involve. (Da ist es wieder, unser Problem Spiegel Online 26.06.2013)
There were local elections in Portugal on Sunday, in which the national ruling party took a beating. Apart from the usual difficulty in translating European political terms into American English, in Portugal there's the added confusion that the official social-democratic party, the one recognized by other social-democratic parties as their sister party, is called the Socialist Party (Partido Socialista/PS). They are the main opposition party nationally. But the ruling conservative party is called the Social Democrat Party (Partido Social Democrata/PSD). Both, unfortunately, are committed to the Merkelist (Merkelian?) neoliberal dogma of low deficits and austerity during a depression. At the moment, the PSD is the one most obviously implementing those policies. The latest vote will make it even more difficult to do so. (Andrei Khalip, Austerity clobbers Portugal's ruling party in local votes Reuters 09/30/2013)
Spain's debt burden is growing, even as economic stagnation makes it impossible to significantly reduce even the existing debt load as a percentage of GDP, the most commonly used measure of a national debt burden. (Spanien häuft neue Schulden an Leipziinger Volkszeitung/dpa 30.09.2013)
Although, as Mark Schieritz points out in Warum Klaus Regling recht hat Die Zeit Herdentrieb 27.09.2013, the most important thing for creditors is not an arbitrary percentage, but the ability to pay. One way to achieve a "haircut" (debt write-off) for crisis countries like Greece or Spain would be for the EU (in one form or another) to refinance the existing debt with much more long-term bonds that would reduce the annual interest payments significantly and push principal payback far into the future, or even indefinitely.
Then there's Cyprus. And Slovenia. And, of course, Greece, which will soon need a new round of EU bailouts.
This is the Angie-fied EU.
Tags: angela merkel, austerity economics, eu, euro, european union