What a difference a season doth make! From standing at the centre of a new post Brexit alliance bravely leading New Europe – Angela Merkel is now the Lone Admiral. Gone the sunny weather, the sailing friends. Gone the glow of glories yet to come. Matteo Renzi is now joining Francois on the lower deck in tourist class. He deserves to. Like David Cameron last summer – he’s lost touch with a majority of those he would serve as captain. The winds are changing. The captains of Britain, France and Italy didn’t adjust course quickly enough and have paid the price. David. Francois. Now Matteo. Could the doughty Ms.Merkel be next ?
Most probably not
Unlike the others, Angela Merkel commands an export based economy that continues to grow and create jobs. The future is good. Berlin is even looking at cutting taxes for the middle class if the CDU is returned to power next year. The migration deal with Turkey is holding up, though always at risk from the Mad King in Ankara. Merkel is unchallenged in her own party. The possible threat from the far-right Alternative for Germany has yet to materialise with the AFD leadership in disarray and the party’s contours still unclear. Merkel’s power is only magnified by the weakness of Germany’s neighbours as they seek a way out of debt and the limitations it creates – both for citizens and the state.
Meet the New Boss – Same as the Old Boss
Whether its Marine LePen or Francois Villon in Paris or Beppe Grillo in Rome, neither will be able to stand up to Angela Merkel on the issues they so passionately champion. Merkel’s made clear she’ll have no deep deficit spending or the building of higher border walls . Grillo wants out of the Euro completely – which will put him at daggers ends with Angela Merkel. True – he might not become Italy’s next Prime Minister, but his party will have a big say in the next coalition. Rome needs credit to make up for the growth austerity failed to deliver. France is even deeper into deficit spending. Both electorates are angry and want to see action. The irony: Grillo and LePen/Villon will need Merkel to get things done.
Push or Shove
After Renzi’s failed referendum, European bank regulators are under even more pressure to grant exemptions to state aid rules. They demand bondholders must share the burden of taxpayer-backed bank rescues. Eight Italian banks are on the ropes. In the months ahead – Angela Merkel will be sitting down with new leaders in Italy and France. Both countries are in debt and at the same time have ailing banks. The populists and right wingers on their way to power know they need Germany to be successful with these and other challenges. It’s a bitter realization.
Cash is King – Debt is Slavery
She might be a tad lonely, but like the dowager queen of Byzantium, she still has plenty of money to spend, while her southern neighbours groan under austerity, high jobless rates and stagnation. Germany can help there, but will it ? German tax payers have credit fatigue. They just got an additional Migrant Crisis Bill of € 2.9 Billion. Total costs for new migrants for 2016 are now at about € 30 Billion. Still cheap compared to the € 40 Billion Italian banks need. But Germans have just been told by the Bundesbank to work longer and get by with less. The public generosity of the last few years can no longer be guaranteed. Not when Germans fear penury in their Not So Golden Years, with no family to fall back on. Even the German Institute for Population Studies is warning pressure on pensions will fuel political polarisation and radicalization. Ms.Merkel ignores that at her own peril.
Moving Francly Along
LePen has already indicated French Freedom means a return to the franc and an exit from the EU. Villon is a mainstream politician – but at some point he could question Euro zone membership. Many of us recall how Paris could always devalue against the D-Mark to make governing easier. Might a Villon in the Elyse do the same? The temptation could be too much to resist. The credit restrictions facing both Paris and Rome’s new leaders will make them seek alternatives. Grillo wants a national currency. Will Villon/LePen follow him? And what about the possibility the Euro could manage an amicable divorce and form a Northern and Southern Euro ? It was a vogue idea during the height of the banking crisis.
Enter the Green Knight : A Signal for a CDU-Green Government ?
It’s one of those delicious ironies that political connoisseurs savor slowly: Angela Merkel rescued by a Green Knight. After months of a Chancellery resembling a funeral parlor for the wake of old friends, finally some good news. A resurrection in Austria! Hope lives! After many a pundit, including this one, predicted a Höfer victory in Austria, the turn-around. Or is it? I’d call it a tactical victory in a larger fight. There are many more to come. They include German parliamentary elections in 10 months. Good relations with Vienna will boost the prospects of a CDU-Green alliance with Merkel at the helm in ’17.It’s working well enough in rich Baden-Würtenburg, although there is a potential rebellion brewing. Socially conservative, educated and well earning parents (an important Green demographic) see the Green Party as not being in step. The party base, not the leadership, have reacted by jettisoning the flambouyent if undiscerning Volker Beck, a gay politician whose appeal faded after a meth bust (that was never prosecuted) and some amateur comments that shout “Deep Disconnect”. The Green’s instincts for power, at least at the base, are still healthy.
The Euro and Elections 2017 : Their Fate is Intertwined
Austria’s Green Knight can not save Angela Merkel from the storm brewing in the South. And not just in Italy. Greece is volatile as well. But Alexander van der Bellen can help Angela Merkel as she calls for fiscal discipline in the Euro zone. And he can present an Austrian fig leave as well, should she move to further tighten migration controls and begin significant deportations of those not eligible for asylum. Simply by doing that, the shine of Van der Bellen’s armour might be enough to help light the way to her fourth term in the Chancellery.
Brian Thomas 
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