Mish's Global Economic Trend Analysis

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Increasing Likelihood of Unstable German Coalition Following Next Elections Posted: 29 Apr 2013 10:08 AM PDT Following my April 23 political prediction Merkel Loses Chancellorship in September as Support for AfD Soars, I received many emails from readers suggesting I was engaged in wishful thinking, that German polls are unreliable, that I was following the wrong polls, etc. I am sticking with what I said. I simply do not see how any sort of stable coalition can form either with or without Merkel. The Green party has now ruled out a coalition with Merkel, SPD wants Merkel gone, and the math for a Merkel-led coalition is simply not there. The Financial Times reports Greens and SPD close ranks in battle against Angela Merkel. Germany's main centre-left opposition parties closed ranks over the weekend in their uphill battle against Angela Merkel, with the Greens signalling a decisive shift to the left. During a three-day party congress in Berlin five months before national elections, the Greens positioned themselves to the left of the Social Democrats (SPD) with calls for higher income tax and a property levy on the rich. The party pledged to raise the top rate of income tax from 45 to 49 per cent, and to levy a 1.5 per cent tax on property worth more than €1m, aiming to raise €100bn over 10 years. Making the first appearance by a Social Democrat leader at a Green congress, Sigmar Gabriel, the party's national chairman, delivered a passionate plea to the Greens to stop flirting with Ms Merkel's conservatives. He said only an SPD-Green coalition could take on the financial markets, which he blamed for the recent economic turmoil in Europe. "There are only two parties in Germany that can tame the financial markets, and that's you and us," he told delegates, to loud cheers. Jürgen Trittin, the Green's parliamentary leader, declared: "The SPD is the only coalition partner that will help us make Germany greener." Coalitions Mathematically Going Nowhere So where is the SPD-Green Coalition Going? Better yet, where is any coalition going? Please consider the latest Wahl-O-Meter polls. Last week I noted AfD has risen from 5% of the vote to 6.6%. Now support is a 6.9%. "Sonst" stands for other. If the Greens will not form a coalition with CDU/CSU, and SPD puts the ouster of Merkel as the price of a coalition, then what is in store for Merkel? A SPD/Green coalition cannot come close to a majority. A CDU/CSU coalition with AfD could do just that if Afd rises above 10% of the vote. I am sticking with my prediction AfD gets 12% of the vote as previous non-voters come out of the woodwork, spotting a chance to make something happen. For a closer look at German political parties and their stated platforms, please see Understanding German Politics written by reader Bernd (not Bernd Lucke, the economist and AfD elected speaker). Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com  Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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