Forming a Coalition in Germany Far From Straight Forward

It would be unwise to take popular talkfests and loud one-liners for negotiations to promptly form Germany’s new government. Europe’s largest economy is now at the beginning of one of the most difficult political processes in its post-war history.Fortunately, barring more dramatic complications, the short-term impact of this Italian-looking imbroglio won’t matter much for euro-denominated asset values. The currency is firmly in the hands of the European Central Bank, a supranational institution that is, by design, the only truly and totally independent central bank in the world.Longer-term implications of German political instability for Europe and the monetary union are a different story. As things now stand, institutional reforms to create a euro area fiscal union, and to strengthen the coordination of structural policies, are effectively postponed sine die — a Latin phrase to say a back, very back, burner that may never light up.That, too, doesn’t matter. The EU and the euro area can function with the current degree of integration, overseen and arguably mismanaged by a sprawling European administrative infrastructure. They should probably copy the Trump administration’s appointees in charge of rolling back excessive bureaucracy and throwing away their thick regulatory rule books.

Source: Germany political crisis is an economic sideshow – commentary – CNBC

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Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam
Craig Erlam

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