The euro was lower against most of its principle trading partners on Monday after German coalition talks stalled, weakening the position of German Chancellor Angela Merkel further. The euro was trading at $1.174, down 0.46 percent as of 3:04 p.m. HK/SIN on Monday. The common currency was also down 0.48 percent against the yen, to 131.49, and 0.46 percent against the pound, to 0.8882.
On Monday Merkel announce that her attempts to form a three-way coalition government were not successful, creating a sudden political crisis in Germany. The Free Democrats (FDP), a pro-business party, withdrew suddenly from the coalition after more than a month of negotiating with Merkel’s conservative bloc.
The coalition’s dissolution was a stunning thorn in Merkel’s previously illustrious political career. Under Merkel’s 12-year leadership, Germany became a symbol of stability, helping the euro zone handle its debt crisis and handling the challenge of Turkish migrants with relative grace. The dissolution of the coalition leaves Germany with two options, both of which are unprecedented in the post-World War Two era. Merkel could form a minority government, or the president could call a new election if no government is formed. Both options seem less than ideal at the moment, as politicians fear that the far-right Alternative for German (AfD) party could secure more than its current 13 percent of votes. Likewise, Merkel’s current coalition partners have not committed to joining a new coalition, which could make it impossible for her to secure enough seats.