The DAX index was down about 4.8 percent today and interest rates for the periphery countries popped up to their highest levels in a month. The Irish Times reports:
Ms Merkel’s party yesterday suffered its fifth election loss this year after the chancellor failed to sway voters in her home state with a campaign based on her handling of the euro area’s debt crisis.
I do not believe these voters are longing for a eurobond. Here is more detail on that election, which was held on supposedly friendly turf for Merkel. The Irish article also reports:
The plans to strengthen the EFSF will empower the bailout fund to buy bonds – in theory relieving the ECB of a task that has provoked the most damaging internal split in the bank’s 13-year history. Euro zone leaders had hoped national parliaments would approve the reforms by early October, but that goal appears to be slipping.
I do not believe these voters are longing for a eurobond. Back to the Telegraph:
A recent opinion poll found that two-thirds of Germans think their parliament should block any more demands for euro bailouts.
You may recall my prediction from earlier this year:
“Enter democracy, stage right” is the next act in the play.
In 2003, referring to the French and German breaking of the three percent budget deficit rule, I wrote:
The real question is what will happen when one of the smaller nations thumbs its nose at France and Germany someday, over some EU agreement, and then claims exemption from the relevant penalties.