Schroeder loses North Rhine-Westphalia. Not as good as it sounds.

Everyone loves to see Gerhard Schroeder get kicked in the goodies. In Saturday's regional elections, Schroeder's SPD lost control of NRW for the first time since 1966. Sounds good, right? Though the good guys won (the Christian Democratic Union), the major reason the SPD lost was because of the labor market reforms forced down the communist throat of the Germans.

Unemployment is at a post-war high in NRW, and voters blame it on the reforms which have cut unemployment benefits for the habitually unemployed, and those who refuse job offers. These are good reforms that have nothing to do with the higher unemployment rate. The real culprit is of course complex, but is largely because the German economy is out of synch with the rest of Europe right now, and because monetary policy is set in Brussels, money is too tight in Germany, but just right in France and Italy. The result? The French are barely growing even with a favorable monetary policy, the Italians are on strike for no particular reason, the Brits, who still set their own monetary policy, are in year 13 or so of their expansion, and the Germans, far and away the most powerful economy in continental Europe, are stagnant.

The ECB won't cut rates because they are inflation obsessed and focused on M3 supply (a braod measure of money which includes equities, etc.), and they are more concerned with their own reputation as inflation busters than they are with a growing, strong Europe.

So Schroeder loses, and that is good. They intend to call early elections. Don't count Schroeder out, but if Angela Merkel, the leader of the CDU wins, I hope she's not tempted to reinstate protectionist, labor "friendly" policies which hurt labor in the long term, along with damaging the overall economy, and thereby loweringthe chances of long-term poverty reduction.

Congratulations CDU, don't betray your center-right principals.