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| Markets rattled as German coalition talks collapse – business live | Markets rattled as German coalition talks collapse – business live |
| (35 minutes later) | |
| Germany’s Social Democrats, who came second in September’s election, are sticking to their policy of not joining a grand coalition with Angela Merkel. | |
| That’s according to a party document seen by Reuters, which reports: | |
| “Given the results of the Sept. 24 election, we are not available for entry into a grand coalition,” read a SPD paper due to be discussed by party leaders that was obtained by Reuters. | |
| “We are not afraid of new elections.” | |
| SPD leadership decides unanimously against new coalition with Merkel's CDU - some in the party disagree, but unlikely this will change much. https://t.co/eNPeoe7DJc | |
| European stock markets have now recovered their earlier losses as traders await news from the Merkel-Steinmeier talks. | European stock markets have now recovered their earlier losses as traders await news from the Merkel-Steinmeier talks. |
| Political analyst Nina Schick suggests the political uncertainty could last for months, though, meaning traders will remain nervous. | Political analyst Nina Schick suggests the political uncertainty could last for months, though, meaning traders will remain nervous. |
| Merkel has finished her talk w/ Gerrman President Frank-Walter Steinmeier (who will call new elections if it comes to that.) Minister President of NRW, Armin Laschet, says that CDU will continue to support Merkel. (Whatever the outcome, she's weakened tremendously.) | Merkel has finished her talk w/ Gerrman President Frank-Walter Steinmeier (who will call new elections if it comes to that.) Minister President of NRW, Armin Laschet, says that CDU will continue to support Merkel. (Whatever the outcome, she's weakened tremendously.) |
| The price that @SPD will likely demand in return for another GroKo is that Merkel goes. That would be a non-starter for CDU (right now.) So it's minority gov't or new elections. Unlikely that we will have new German gov't until well into 2018. Bad news for Brexit. | The price that @SPD will likely demand in return for another GroKo is that Merkel goes. That would be a non-starter for CDU (right now.) So it's minority gov't or new elections. Unlikely that we will have new German gov't until well into 2018. Bad news for Brexit. |
| Here’s our latest report from Berlin. | Here’s our latest report from Berlin. |
| Angela Merkel’s political difficulties could be bad news for the UK over the Brexit talks. | Angela Merkel’s political difficulties could be bad news for the UK over the Brexit talks. |
| Mihir Kapadia, CEO of Sun Global Investments, reckons it will be hard for the chancellor to give Britain any concessions, as she’ll have to take a ‘pragmatic’ approach. | Mihir Kapadia, CEO of Sun Global Investments, reckons it will be hard for the chancellor to give Britain any concessions, as she’ll have to take a ‘pragmatic’ approach. |
| She will be preoccupied with domestic issues and unable to assume a leadership role in the EU. | She will be preoccupied with domestic issues and unable to assume a leadership role in the EU. |
| She was expected to return to the European fray as the leader of Germany and push for a faster more pragmatic approach which would be more favourable to the UK. However, she will now be mired in domestic political difficulties and will not have the time or the perceived authority to take a lead in Europe. The vacuum will be filled in part by a more pro-EU stance by Mr Macron. | She was expected to return to the European fray as the leader of Germany and push for a faster more pragmatic approach which would be more favourable to the UK. However, she will now be mired in domestic political difficulties and will not have the time or the perceived authority to take a lead in Europe. The vacuum will be filled in part by a more pro-EU stance by Mr Macron. |
| Analysts at Citigroup say the euro is being propped up by several factors - including the lack of clarity over German politics right now. | Analysts at Citigroup say the euro is being propped up by several factors - including the lack of clarity over German politics right now. |
| Citi has 3 explanations why the collapse of Merkel’s coalition talks in #Germany has not seen a stronger blow to Euro. 1. It was already discounted2. The market was positioned short ahead of the announcement3. There is too little clarity to trade pic.twitter.com/7HIZNCzKWp | Citi has 3 explanations why the collapse of Merkel’s coalition talks in #Germany has not seen a stronger blow to Euro. 1. It was already discounted2. The market was positioned short ahead of the announcement3. There is too little clarity to trade pic.twitter.com/7HIZNCzKWp |
| Over in Berlin, Angela Merkel arriving for a meeting with German President Frank-Walter Steinmeier at Bellevue Palace, his official residency. | Over in Berlin, Angela Merkel arriving for a meeting with German President Frank-Walter Steinmeier at Bellevue Palace, his official residency. |
| Merkel will brief Steinmeier about the state of the coalition talks (nicht sehr gut!). Steinmeier is then expected to give a statement around 2.30pm local time (1.30pm GMT) | Merkel will brief Steinmeier about the state of the coalition talks (nicht sehr gut!). Steinmeier is then expected to give a statement around 2.30pm local time (1.30pm GMT) |
| Euro volatility has risen this morning, suggesting that traders are more nervous about Europe’s prospects. | Euro volatility has risen this morning, suggesting that traders are more nervous about Europe’s prospects. |
| But...we’re nowhere near the levels seen in April, when Emmanuel Macron and Marine Le Pen were battling for the French presidency, as this chart shows: | But...we’re nowhere near the levels seen in April, when Emmanuel Macron and Marine Le Pen were battling for the French presidency, as this chart shows: |
| Kathleen Brooks of City Index suggests the markets may be underestimating the risks from Germany. | Kathleen Brooks of City Index suggests the markets may be underestimating the risks from Germany. |
| Volatility spiked ahead of the French election, which turned out to be a boon for markets as Emmanuel Macron was easily elected President of France. The market got the level of risk wrong back in April, and were overly worried, could they be wrong this time and be overly complacent? | Volatility spiked ahead of the French election, which turned out to be a boon for markets as Emmanuel Macron was easily elected President of France. The market got the level of risk wrong back in April, and were overly worried, could they be wrong this time and be overly complacent? |
| How this saga plays out in the coming days will be crucial for European traders. It’s not beyond the realm of possibility that Germany could end up being the biggest political hot potato for the Eurozone this year. | How this saga plays out in the coming days will be crucial for European traders. It’s not beyond the realm of possibility that Germany could end up being the biggest political hot potato for the Eurozone this year. |
| A quick reminder of the result of September’s election shows why Angela Merkel is in a bind. | A quick reminder of the result of September’s election shows why Angela Merkel is in a bind. |
| Having only won 246 out of the 706 seats in the Bundestag, the CDU/CSU needs coalition partners to form a stable government. | Having only won 246 out of the 706 seats in the Bundestag, the CDU/CSU needs coalition partners to form a stable government. |
| However, the maths is tricky, as the SPD isn’t willing to join another grand coalition. | However, the maths is tricky, as the SPD isn’t willing to join another grand coalition. |
| That leaves four smaller parties; but ideological disagreements mean a formal deal with either the left-wing Die Linke or the far-right AfD isn’t feasible. | That leaves four smaller parties; but ideological disagreements mean a formal deal with either the left-wing Die Linke or the far-right AfD isn’t feasible. |
| So a deal with the Greens and the the FDP was the only option. | So a deal with the Greens and the the FDP was the only option. |
| Christian Odendahl of the Centre for European Reform reckons the SPD could help prop up a minority administration. | Christian Odendahl of the Centre for European Reform reckons the SPD could help prop up a minority administration. |
| #SPD won't be able to get support for a Grand Coalition. But it cannot stick with "We are going into Opposition" either. So has to offer minority government to Merkel. If #SPD is smart, it offers it *together with Greens and FDP*. | #SPD won't be able to get support for a Grand Coalition. But it cannot stick with "We are going into Opposition" either. So has to offer minority government to Merkel. If #SPD is smart, it offers it *together with Greens and FDP*. |
| Here’s a chart of the euro’s sharp moves against the US dollar this morning: | Here’s a chart of the euro’s sharp moves against the US dollar this morning: |
| Check out this #EURUSD chart, the Merkel "smile" as the euro brushes off German political uncertainty. pic.twitter.com/YtzXW02z35 | Check out this #EURUSD chart, the Merkel "smile" as the euro brushes off German political uncertainty. pic.twitter.com/YtzXW02z35 |
| However, the euro is still down 0.5% against the pound, at €1.125. | However, the euro is still down 0.5% against the pound, at €1.125. |
| A flurry of headlines from Germany are helping the euro to claw back some of its earlier losses. | A flurry of headlines from Germany are helping the euro to claw back some of its earlier losses. |
| The Free Democrats have apparently signalled that they could support a minority government made up of the CDU-CSU bloc and the Green party. | The Free Democrats have apparently signalled that they could support a minority government made up of the CDU-CSU bloc and the Green party. |
| FDP parliamentary director Marco Buschmann told the Bild newspaper that: | FDP parliamentary director Marco Buschmann told the Bild newspaper that: |
| “If there are good initiatives, then we are available.” | “If there are good initiatives, then we are available.” |
| The prospect of Angela Merkel holding onto power seems to be reassuring investors, even though nothing is clear at this stage. | The prospect of Angela Merkel holding onto power seems to be reassuring investors, even though nothing is clear at this stage. |
| FDP floor leader Buschmann tells Bild his party doesn't want fundamental opposition, but play a constructive role by supporting a minority government https://t.co/YDRiZtOmBz | FDP floor leader Buschmann tells Bild his party doesn't want fundamental opposition, but play a constructive role by supporting a minority government https://t.co/YDRiZtOmBz |
| Germany's FDP would support a minority Merkel government, Bild reports, citing FDP's chief whip Marco Buschmann https://t.co/pseRzJfgjI | Germany's FDP would support a minority Merkel government, Bild reports, citing FDP's chief whip Marco Buschmann https://t.co/pseRzJfgjI |
| As Merkel seeks Plan B, DAX, euro/$ and 10-yr bund yield recapture early losses. Economics trumps politics again? Or a bet on minority govt? pic.twitter.com/xtIBuFPwGl | As Merkel seeks Plan B, DAX, euro/$ and 10-yr bund yield recapture early losses. Economics trumps politics again? Or a bet on minority govt? pic.twitter.com/xtIBuFPwGl |
| Dutch foreign minister Halbe Zijlstra has warned that the collapse of German coalition talks last night is ‘bad news’ for Europe. | Dutch foreign minister Halbe Zijlstra has warned that the collapse of German coalition talks last night is ‘bad news’ for Europe. |
| Zijlstra told reporters in Brussels that: | Zijlstra told reporters in Brussels that: |
| “Germany is a very influential country within the EU so if they don’t have a government and therefore don’t have a mandate it’ll be very hard for them to take positions.” | “Germany is a very influential country within the EU so if they don’t have a government and therefore don’t have a mandate it’ll be very hard for them to take positions.” |
| (thanks to Reuters for the quote) | (thanks to Reuters for the quote) |
| Peter Thal Larsen, European editor at Breakingviews, sums up the situation: | Peter Thal Larsen, European editor at Breakingviews, sums up the situation: |
| Mugabe holding onto power and Merkel possibly losing it were headlines I did not expect to wake up to this morning.l | Mugabe holding onto power and Merkel possibly losing it were headlines I did not expect to wake up to this morning.l |
| Political economics professor Henrik Enderlein says Angela Merkel has been “seriously weakened”, with no easy way forward. | Political economics professor Henrik Enderlein says Angela Merkel has been “seriously weakened”, with no easy way forward. |
| Implications of 🇩🇪 coalition talk collapse:- no strong + stable gvt before fall 2018 at the earliest- minority gvt possible, but untested, unlikely can last for long- Merkel seriously weakened - end of era near- leadership gap in 🇪🇺 - all eyes on Macron#Jamaica | Implications of 🇩🇪 coalition talk collapse:- no strong + stable gvt before fall 2018 at the earliest- minority gvt possible, but untested, unlikely can last for long- Merkel seriously weakened - end of era near- leadership gap in 🇪🇺 - all eyes on Macron#Jamaica |
| Cruel for #Merkel: Constitution provides script for internal CDU-CSU coup against her. She must ask Bundestag to elect her Chancellor. Her problem is not she won't be elected, but number of missing CDU-CDU votes in this anonymous election. Dream moment for her enemies. | Cruel for #Merkel: Constitution provides script for internal CDU-CSU coup against her. She must ask Bundestag to elect her Chancellor. Her problem is not she won't be elected, but number of missing CDU-CDU votes in this anonymous election. Dream moment for her enemies. |
| Option 1: Grand Coalition. Highly unlikely as durable solution. Transition to snap elections at best.Option 2: Minority government tolerated by SPD. See option 1.Option 3: Snap elections. Difficult right now. Don't expect them before late spring 2018. | Option 1: Grand Coalition. Highly unlikely as durable solution. Transition to snap elections at best.Option 2: Minority government tolerated by SPD. See option 1.Option 3: Snap elections. Difficult right now. Don't expect them before late spring 2018. |