The poor showing of Germany's ruling party in regional elections in the city state of Bremen today is a negative for the Euro. Germany together with France are the key players in keeping the Euro alive by providing financial aid to peripheral countries in crisis. Germany's ruling party has an incentive to change the political discourse - to show that chancellor Merkel is serious about German interests and about protecting the Euro's value.
Protecting the Euro's value is code for staying the course and extricating more austerity measures from peripheral countries. Meanwhile, nearly daily protests in Greece and new protests in Spain show that austerity measures are unreasonable in the long-term. Austerity measures depress economic growth which in turn renders debt payoff virtually impossible in the long run.
Rough rule of thumb: an economy needs to grow 5% to afford paying a 5% interest rate on its debt. For comparison: Greek economic growth in thelast quarter minus 5%, yet the country is currently paying +7% on "rescue facility" loans (and 17% on its free floating 5-year debt).
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