Euro falls on the back of Merkel’s failed attempt to form a coalition.

Europe’s longest-serving leader is currently standing on the abyss of an uncertain future. Angela Merkel’s attempt to form a coalition with the Free Market Liberal party(FDP) collapsed over the weekend with the FDP walking out and with its leader saying there was no “basis of trust” to form a new German government.

The failed negotiations now mean that Mrs. Merkel will meet with the German President Frank-Walter Steinmeier later today, who has the power to call a snap election.

Many are citing that this latest chapter is the worst crisis ever faced by Merkel’s in her 12-year tenure.

It appears that the main area of disagreement is once again the talk and fear of immigration, with the German Chancellor defending her open border policy during the 2015 -2015 refugee crisis.

Angela Merkel now has two options, try to form a minority government with the Green party which would leave her with very little power in the German parliament or indeed ask the German President to call a new general election only months after the previous one in September.

This latest case of uncertainty means that Europe’s biggest economy is handicapped and unable to move forward in any euro-area policies.

AS news of the failure to form a coalition hit the markets, the Euro has come under pressure, with the EUR/USD currently trading at the time of writing at 1.1749 and the EUR/GBP trading around 0.8879.

The DAX has also fallen and is currently trading around 12886.30.

With the financial markets being heavily influenced by politics, Angela Merkel’s meeting today with the German President and its outcome is being monitored closely and many a Euro bull are holding their breath.

References

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