Merz rejected in Germany, why have the returns of the titles climbed and did not get off? Doubts about Europe’s plans

The financial markets reacted in an apparently unsettling way to the rejection of the government Of Friedrich Merz In the first vote in the Bundestag. Of course, the candidate Chancellor maintains all his possibilities to make it in the next votes, as the Courier With Mara Gergolet. But what are they trying to tell us investors with their strange reactions today? Do they know or do they believe they have understood something that politicians still don’t make explicit?

Investments at risk

The equity indices all over Europe have slipped a little backwards (in the middle of the day less 0.84% ​​for the German Dax, minus 0.34% for the Italian ftsemib), but this is the least surprising part. The presence of the francs of shooters in the great coalition in Germany makes it clear that Merz will still be a weakened leader and subject to political vessels. As a result, he will probably encounter problems in carrying out the thousand billion of investments promised in defense and in infrastructures in the next five years. It is therefore not strange that the bag falls, because now it is expected to be some less investment in Germany and therefore less economic growth also in the coming years (after a three -year period of zero growth or even slightly negative).

The strangeness of the bond markets

But true strangeness, all to be interpreted, is in the behavior of the bond markets. Particularly in the market of European government bonds. In the middle of the day today, after the black smoke on the Berlin government, they too are all in red: the prices of the government bonds of all European countries have slightly descended and therefore their returns were a little climbed anywhere (two base points, or 0.02%, halfway through the day). As if the risk-paese risk had increased throughout Europe.

The effects on the public expenditure

How is it possible? In theory it would have to go on the contrary: Merz, weaker, perhaps will no longer be able to launch public expenditure for investments for all a thousand billion promised in deficit for defense and infrastructure; therefore in theory the Germany It should be less debt in the coming years and the yields of sovereign bonds should react to the news becoming lower, precisely because there should be less public spending in deficit to be financed on the market.

The fears about the European plans

Instead, returns are higher, as if the debt was destined to increase even more or will become more difficult to manage. The market probably thinks that now Merz perhaps will no longer be able to announce his expected plans with the French president Emmanuel Macron; For weeks there was talk of a project of eurobond for defense and other common European plans. The first communications were expected for the next few days, although probably the Eurobond project would still have had to wait a little.

The risk-paese risk of the entire euro area rises

But it is certainly different now. Merz’s internal maneuver margin to accept them is much more restricted and those plans (which could benefit Italy) become more unlikely. This reflection appears negative for the political-institutional growth and credibility of the European Union in general and the euro area in particular. For this-because a united and integrated Europe today appears further away-the risk-pasta rises throughout theeuro area. The concrete integration – common debt, common defense and more – would have made any economy of the club stronger and helped to manage the weight of each problem within each of the countries. But today, with Merz kept in a bain -marie by his own parliament, it seems of a small but important more distant step.