Euro Falls After Merkel Election Loss -- DT Trading Limited Analytical Department

Sept. 6, 2011 - PRLog -- Given the lack of market news coming out of the US on this Labor Day holiday, Europe has entertained us with several important events. German Chancellor Angela Merkel’s party lost the fifth round of elections this year, and this time in Merkel’s home region of Mecklenburg. Merkel was unable to persuade voters to join her side in the campaign dedicated to ending the debt crisis in the Euro zone. According to preliminary results released today, the opposition Social Democratic Party had 35.7% of the vote yesterday in Mecklenburg – Vorpommern. Merkel’s Christian Democratic Union received only 23.1% of the vote yesterday – the worst in Germany’s electoral history since 1990, when East and West Germany reunited into a single country. DT Trading analysts think that such a result will take its toll on Merkel’s policy and put a lot of pressure on the Euro, since the lack of a majority in the Bundestag will not give the chancellor any more allies in the discussion over the fate of the Euro zone.

The vote results in the eastern state where Merkel’s constituency is located will mean defeat and loss of votes for her national coalition in all six German states where votes are taking place this year. You don’t need to dig very deep to understand that voters are opposed to Merkel’s attempts to prevent the collapse of the Euro zone by earmarking the majority of taxpayers’ money for the most problematic countries. “Merkel's problem is that she fails to generate confidence in her policies and those of her coalition partner,” says Gero Neugebauer, professor of political science at the Free University of Berlin. “It’s about the consistency of her statements” on bailouts for indebted euro countries. As a result, the Euro fell 0.5% today to $1.4134 as of 8:59AM in Frankfurt.

Merkel spoke about her strategy to battle the crisis directly to voters in a series of eight meetings over 18 days. She said that Euro zone countries need to increase cuts to their budget deficits and affirm their objection to issuing unified Euro bonds. She canceled her appearance at the last congress of the Christian Democratic Union two days ago after her father died at the age of 85.

DT Trading analysts report that other controversial news has come out of the UK today – former Finance Minister Alistair Darling said in an interview that Bank of England Governor Mervyn King has accumulated too much personal power and members of the board of directors should take more decisive steps towards improving the central bank’s management. Darling explained that differences of opinion with King interfered with his efforts to fight the financial crisis at the end of 2007. Darling did not recommend King for reappointment to a second term. The former finance minister gave his interview yesterday on the BBC’s “The Andrew Marr Show” ahead of the release of his book this week entitled “Back From the Brink.” “The current government wants the Bank of England to be responsible not only for interest rates, but also to supervise banks, an area where it has a particularly amusing track record. He was also tasked with smoothing out the peaks and troughs of the economic cycle,” Darling continued. “This is an improperly high set of tasks to entrust to one person.”

According to DT Trading political experts, the reason for Darling’s sharp remarks are the policies being pursued by Prime Minister David Cameron’s government, which forced Darling’s Labor Party out of politics last year. Cameron’s policy is aimed at scrapping the existing banking regulations system. The new plan involves a large amount of centralization by means of creating a Financial Policy Committee within the central bank under the chairmanship of King, who has unified his responsibility for financial stability along with his responsibility for monetary policy.

DT Trading Limited Analytical Department

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