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C. Bastasin: German political earthquake may have consequences on the banking union and the ESM

A change of leadership in the Social Democratic Party (SPD), the junior partner in the German coalition government, may have severe consequences on the process of deeper economic integration in the euro area that Finance Minister Olaf Scholz was fostering.

In a development that shook the Berlin political establishment, the SPD announced on Saturday the election of co-leaders Norbert Walter-Borjans and Saskia Esken. They will replace Scholz at the helm of Europe’s oldest party, weakening the party’s old guard. Walter-Borjans and Esken have pushed for a renegotiation of the alliance between the Social Democrats and Chancellor Merkel’s Christian Democrats, which has governed Germany for 10 of the past 14 years. The new leftwing leadership team might plunge Germany into political uncertainty and reduce the margins for a compromise at the European level on the reform of European economic governance.

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