lighthouse - red alert - 2013-11-12.pdf

Lighthouse Investment Management

Red Alert - November 12, 2013

Red Alert

Germany to allow referendums



• According to reports in Süddeutsche Zeitung and Bavarian Radio, Germans might be able to vote

in referendums (so far only possible locally, but federally only in very specific cases, out of fear

of populist / racist causes after the Third Reich):

http://translate.google.com/translate?sl=de&tl=en&js=n&prev=_t&hl=en&ie=UTF-

8&u=http%3A%2F%2Fwww.sueddeutsche.de%2Fpolitik%2Fkoalitionsverhandlungen-union-und-

spd-wollen-bundesweite-volksabstimmungen-1.1816241

• The proposal mentions topics such as potential new entrants to the EU, shifting of competences

to Brussels or “Germany’s financial obligations at EU level”.

• This is obviously a nod to the AfD (anti-Euro party, which almost made it into parliament at

recent federal elections).

• The AfD came within 27,000 votes of the Liberals (FDP, former coalition partner of Angela

Merkel’s CDU/CSU):

• The proposal also contains the option for referendums on laws passed by Bundestag (House of

Representatives / Lower House), permissible upon collection of 1 million signatures within six

months of passage. (Germany has 80 million inhabitants, of which 43 million participated in

recent national elections.)

• For success of a referendum, a simple majority of votes cast would suffice (no quorum needed).

This is quite a low bar.



• The proposal only foresees a requirement for the referendum to pass in enough Länder (states)

comparable to a majority in the Bundesrat (Federal Council / Upper House)

I am not sure if politicians understand they will 'set the cat free among the pigeons'. Maybe it is

intended. By pointing out the threat of a referendum, Mrs. Merkel could more easily refuse bailing out

other countries with German taxpayers’ money. The possibility of referendums increases Germany’s

negotiating power, and makes austerity probably even harsher for over-indebted countries.

It will be interesting to see how this plays out for potential bailouts of Slovenia and Croatia. In case of

local bank failures, a confiscation of deposits (with Cyprus as a template) now seems inevitable.

Any questions or feedback welcome.

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lighthouse - red alert - 2013-11-12.pdf

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