Back in 2011, I predicted that when push ultimately came to shove, Germany would leave the Euro before it picked up the full tab. The reasoning is simple: the Germany population will not stand for rampant monetization. They know how that ends (Weimar) and they will kick out any politician who seems to support the idea.

German Chancellor Angela Merkel has walked a tightrope over the last few years of keeping the EU together without infuriating the German populace to the point of having to abandon ship.

To do this, Merkel has maintained a firm stance of “we’ll write the check provided conditions are met” much as a parent would give a child his or her allowance provided the child performed its chores satisfactorily. In the case of Germany, the “chores” are required conditions of austerity measures and budgetary requirements in exchange for bailout funds.

By doing this, Merkel is able to play hardball on an economic front (having failed to meet its German-required financial targets Greece had to wait an additional six months to receive another installment of its Second bailout) without appear too hard-nosed on a political front (she continually pushes to keep the Euro together, expressing a willingness to help other nations… as long as they meet her budgetary requirements).

The policy has thus far been a success with Merkel’s approval rating soaring to its highest level since 2009 (before her re-election bid). However, her political party has begun to realize that there will be consequences for defending the Euro no matter what the cost, suffering an unexpected defeat in January of this year.

Germany’s center-left opposition won a wafer-thin victory over Chancellor Angela Merkel’s coalition in a major state election Sunday, dealing a setback as she seeks a third term at the helm of Europe’s biggest economy later this year.

The opposition Social Democrats and Greens won a single-seat majority in the state legislature in Lower Saxony, ousting the coalition of Merkel’s conservative Christian Democratic Union and the pro-market Free Democrats that has run the northwestern region for 10 years. The same parties form the national government.

The 58-year-old Merkel will seek another four-year term in a national parliamentary election expected in September. She and her party are riding high in national polls, but the opposition hoped the Lower Saxony vote would show she is vulnerable.

The outcome could boost what so far has been a sputtering campaign by Merkel’s Social Democratic challenger, Peer Steinbrueck.

“This evening gives us real tailwind for the national election,” said Katrin Goering-Eckardt, a leader of Steinbrueck’s allies, the Greens. “We can and will manage to replace the (center-right) coalition.”

However, the close outcome also underscores the possibility of a messy result in September, with no clear winner.

http://bigstory.ap.org/article/merkel-risks-election-year-setback-state-vote

Merkel is up for re-election this year. So she will be more attentive to voter needs than usual. With that in mind, the following news story doesn’t bode well for her and her pro-Euro policies:

One in four Germans would be ready to vote in September’s federal election for a party that wants to quit the euro, according to an opinion poll published on Monday that highlights German unease over the costs of the euro zone crisis.

Germany’s mainstream parties remain solidly pro-euro despite grumbling over bailouts of countries such as Greece. A German taboo on nationalism, rooted in atonement for the crimes of the Nazi era, has helped to muffle eurosceptic voices.

But the poll conducted by TNS-Emnid for the weekly Focus magazine showed 26 percent of Germans would consider backing a party that wanted to take Germany out of the euro and as many as four in 10 Germans in the 40-49 age bracket would do so.

“This suggests there may be potential here for a new protest party,” Emnid chief Klaus Peter Schoeppner told Focus.

http://www.reuters.com/article/2013/03/11/us-germany-eurosceptics-idUSBRE92A07F20130311

This is a MAJOR trend to watch. If the German population begins to swing more in favor of leaving Euro, to the extent that it could cost Merkel her re-election, then my 2011 prediction could indeed begin to become a reality.

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Best Regards,

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