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Sunday, May 9, 2010

German Regional Elections and Their Consequences

It pays to follow results such as these when we are in the middle of a crisis. Whatever you think of Angela Merkel, the rout of her party and its coalition partners in the North Rhine-Westphalia regional elections might spell deepened trouble for financial markets this coming week. Her government's backing for the bailout package for Greece seems to have a lot to do with these election results. As such, continued sovereign intervention in the European financial crisis appears doubtful. This is especially true as the most recent election result in the United Kingdom still has not produced a definitive outcome, and whatever coalition government emerges will be too weak to take on something as unpopular as bailing out fragile southern European economies. 

Stay tuned and keep your eyes peeled. This may have already been anticipated by financial markets, but one cannot be sure. 

Update: It appears given market futures that this is not having a huge impact on the markets and that they are instead focusing on the larger than expected responses by the EU and ECB in the last 24 hours. I'm glad to see that Jean Claude Trichet lost out and that the ECB will be providing assistance to governments should they be shut out of the private bond markets. His prior unwillingness was the cause of the Thursday and Friday blood baths. 

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