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Germany becomes Eurosceptic as costs of Greek bailout create unpopularity for Merkel

Screen shot 2010-05-18 at 07.56.01 One of the big implications of the rescue of Greece is electoral unpopularity for Angela Merkel.

Last weekend the German Chancellor's CDU party lost power in Germany's most populous state, North Rhine-Westphalia. With many of the state's cities are the verge of bankruptcy, Mrs Merkel's federal coalition is in no position to help them - in large part because of the need to provide financial assistance to Greece. Some estimates put the cost to Germany of the Greek rescue package at £19 billion.

The German Chancellor has come under fire from her own party because of her decision to help Greece. The CDU leader in North Rhine-Westphalia, Juergen Ruettgers complained: "Why do we have to help? And where does it end?" Das Bild, Germany's best-selling newspaper, ran the headline "We are again Europe's fools" after the scale of the Greek bailout emerged.

Mrs Merkel had been in an uncomfortable stand-off with her FDP coalition partners over tax cuts. Central to the FDP's manifesto was supply-side tax reform but the more fiscally conservative CDU now regards these cuts as unaffordable. The FDP's support fell by half in the NRW elections - a much steeper decline than that of the CDU. It now worries about its electoral future and is seeking to renegotiate the terms of its coalition deal with Merkel.

The task of cutting German spending has also become harder. The loss of the NRW election means the CDU-FDP coalition has lost its majority in the Upper House of Germany's legislature, the Bundesrat. It will now need support from the Greens or Social Democrats if reductions in spending are to be passed.

In the Wall Street Journal, Bill Jamieson wonders if Germany could be about to become Europe's most Eurosceptic nation. 50% of Germans want the DeutscheMark back. Mrs Merkel meanwhile wants other Eurozone nations to adopt balanced budget amendments. And if they don't? Bavarian leader of the CSU, Edmund Stoiber says: "When a state refuses to bring its finances into order, then it should be possible that the other members of the euro zone exclude it."


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