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ANGELA MERKEL has won a decisive victory in German elections. Europe has waited for this for years, in the expectation that after the election she will be more inclined to do something permanent about the sovereign debt crisis. So now what?

THE first thing we need to wait for is to see who will partner Merkel’s party group. The Free Democrats, junior partners in the last Government, didn’t win any seats. Merkel’s group is five seats short of a majority, and will have to partner with one of the left-leaning parties to form a coalition.

THERE has been some expectation in the press that a party of the left in the ruling coalition will soften Merkel’s hardline stance to the bailout nations. There has also been an idea that Merkel wanted to make sure she had the political capital of an election victory before doing something as unpopular as easing the terms of the loans. Even the finance minister Wolfgang Schäuble has hinted this.

GERMANY can’t dictate the terms of the bailout, because they are only one of many parties involved. The IMF and ECB have a say, and while the IMF has been suggesting we should ease up a bit on the bailout terms the ECB has been consistently stating that they can’t forgive any loans because that would de facto mean they were financing fiscal policy.

WE ALSO have a split among Eurozone nations. Some countries such as France are ready to be more lenient to the debtor nations. Others have lined up behind Germany in the hardline camp, including Finland. If Germany decides to renegotiate the terms of the bailouts, will Finland follow their lead?

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David J. Cord
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