At this point, many Eurozone countries are on the verge of holding elections. The list includes Portugal , Italy, Spain , Greece and Germany. Apparently, the German election will be the most important one since Germany is the key economy in the Eurozone and the local Eurozone crisis cannot be resolved without Germany.
Will the new authorities preserve the tough course of financial consolidation in the Eurozone? Will the European integrity remain one of the key issues in the German list of external policy priorities.
At this point, almost nobody questions Angela Merkel’s victory. Still, experts question Europe’s fate after the election in Germany. It seems like the economic and political situation in the Eurozone is currently improving. The PMI figures grow in almost all European states, RVD Markets reports. The existing recession in European economies is gradually turning into stagnation, which is a few steps away from growth…
The indicator measuring investor confidence in Germany increased by 7.6% up to 49,6 in September, which is much better than 45 expected by analysts. Meanwhile, EURUSD grew up to 1,3351 yesterday.
The chart below, courtesy of Masterforex-V Academy, reflects the current state of affairs in the market of EURUSD:
Still, some experts do not share the optimism and say that the Eurozone economy will collapse together with the Euro after the election. What are the reasons?
Firstly, they say the Eurozone will have to keep bailing out Greece with another (3rd) tranche of financial support. Obviously, if this is the case, German taxpayers will have to donate most of all. Further debt write-downs are also probable.
Secondly, endless austerity raises more and more concerns and indignation throughout the Eurozone, which may eventually turn into mass protests in Greece, Portugal , Spain and Italy. Those countries could partially resolve their financial problems by means of currency devaluation but Germany is against a weak common currency. At the same time, any stimuli in Southern Europe may well exert serious pressure on the Euro.
Thirdly, Germany’s economic policies within the scope of the EU are inconsistent. At the same time, the EU is indecisive in terms of implementing reforms.
At the same time, if a big coalition is formed (including social democrats) may help the ECB to consolidate its power and increase its activity. This may lead to an economic slowdown, thus hindering the volatility of the Euro currency.
According to Saxo Bank, if the coalition will remain the same, simultaneously retaining its political course, EURUSD may fall down to 1,15.
Still, there are optimists that are convinced that Merkel and the coalition will be able to preserve the stability of the Germany economy and prevent the devaluation of the common currency.
