Merkel’s fourth mandate hangs in balance and ushers in a weaker Euro

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German government coalition talks breakdown means political instability and a weaker euro. It is a good strategy to follow closely the German crisis if you are planning a currency transfer in the immediate future.

The collapse of the negotiations for the formation of a new German government announced last night by the Liberals’ leader has placed an increasingly weaker Merkel in the face of two unprecedented choices in German history. A minority government led by the outgoing Chancellor Merkel, who has already said that she does not welcome this outcome, or a feared return to the ballot box that could strengthen the anti-system and more markedly populist forces.

As a result, Germany is moving towards a period of instability and political weakness, which will inevitably be reflected in all European architecture and the economy of the entire Union, of which Germany is the main locomotive. Mrs Merkel’s leadership, which has kept her in power for twelve years, is being called into question for the first time. Her predicaments are even more worrying because of a clear lack of immediate alternatives. After the vote in September, although with a declining consensus, it was hard to imagine that Mrs Merkel could not complete her historic fourth term in office. Everything is now to be renegotiated.

A weaker Euro

Reflections were immediately felt in terms of exchange rates with the euro currency falling on the exchange rate markets against the dollar, but capable of remaining substantially equal against the sterling pound. If, however, the uncertainty and instability in Germany continues despite the appeal of its Federal President, Frank-Walter Steinmeier, to the sense of responsibility of the German political parties so as to form a government without having to return to elections, the euro's position on the currency markets will weaken.

This points to a more careful planning of currency transfers so that this likely new scenario can be exploited more effectively. It could be a favourable time to act and schedule limit orders, and organise the transfer of money when the exchange rate reaches a favourable level for your investment. In this way it is possible to reduce costs to the minimum and save considerable amounts of money in your international money transfer and take advantage of what the actual situation points to be for the future position of dollar and sterling pound against the euro.


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