Is Merkel Losing Her Friends… And Her Job?

With Greece entering center-stage once again, the markets have re-focused their attention back to the ongoing European debt crisis. At last week’s G20 meeting, economic brainiacs like George Soros (my idol!) and U.S. Treasury Secretary Tim Geithner pressured European leaders to do something more to help the European economy.

Talks largely centered around the current programs in place to save struggling euro zone economies. On Monday, I talked about EFSF leveraging and expanding the facility to help serve as a stop gap. Today, I want to shine the lime light on Germany and the EFSF as the German parliament votes in favor or against expanding the fund tomorrow.

Almost everyone expects that German Chancellor Angela Merkel will get enough votes for the bill to be passed, which would allow an expansion of the EFSF. The Social Democrats and the Green Party, the country’s two main opposition parties, already pinky swore that they would vote in favor of increasing the fund. However, word around the hood is that some of Merkel’s allies are actually threatening to go against it. Why?

Unsurprisingly, some of Merkel’s critics think that Germany has already done its part and given so much to contain the sovereign crisis. If they vote for EFSF expansion, it would only mean more expenses for the country. To be specific, Germany will have to step up its contribution to the EFSF from 123 billion EUR to 211 billion EUR.

And it doesn’t stop there!

Voting for the bill would also mean that Germany will agree to the following when the situation calls for it: Recapitalize banks, shell out moolah that will serve as liquidity loans, and buy government bonds of countries in the brink of default.

Consensus is though, for the EFSF to get enough votes anyway. So why worry, you ask?

Political gurus warn that relying on opposition parties to get the majority of the 620-member parliament will undermine the Chancellor’s authority. They believe that Merkel has to get enough votes from her allies (Christian Democratic Union (CDU), the Christian Social Union, and the liberal Free Democratic party) to establish her power.

Failure to get enough votes from her allies could result to the coalition crumbling. Heck, some even say that she could lose her job as chancellor as it would imply that she can’t hold the coalition together. Yikes!

The upcoming vote on expansion of the EFSF tomorrow, September 29, is only the first of many that the German parliament would have to approve and tensions are already high. Can you imagine how it’s gonna be when it’s time for them to more serious plans like kick-starting the ESM? Err, it doesn’t look like a pretty picture to me.

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