New party wants to split euro into blocs

The Berlin headquarters of Angela Merkel’s ruling

Christian Democratic Union

(CDU) lies on the northern bank of the Landwehr Canal, a defensive dyke once built to keep out marauders.

Just beyond the southern bank, the Eurosceptic Alternative for Germany (AfD) is launching its second bid for political power.

It scored 4.7 per cent in last September's federal election, narrowly missing winning Bundestag seats on its first attempt. Now it's breathing down Merkel's neck again in the European elections.

The AfD argues the German leader has broken EU rules to allow euro bailouts, opening the door to rescue efforts that have undermined euro area solidarity and endanger the entire EU.

The AfD’s answer: encourage periphery euro zone countries out the door or split the single currency into northern and southern blocs.

Polling 6 per cent ahead of the May 25th election, the AfD is likely to join a new Eurosceptic grouping in the next European Parliament. It might perform even better if things were not so calm on the euro crisis front.

"It's wrong to suggest the euro crisis is solved; this is just a pretend calm to fool voters," said Prof Bernd Lucke, a Hamburg economist and AfD leader. "The euro zone's problems are unsolved, particularly the budgetary deficits."

The AfD accuses Merkel of using the euro crisis as a smokescreen to transform the EU into a centralist entity, a bottomless pit of debt-sharing. It wants decentralisation of powers to member states to boost democratic controls and a smaller European Commission. As in last September, the AfD is pitched squarely at conservatives on the CDU's right wing who feel disenfranchised by Merkel's push to the political centre.

At its core the AfD's reform campaign proposes an end to what it calls the " einheitseuro " or "unified euro". Like euro critics around the continent, the AfD views it as a one-size-fits-none construct: too strong for France and southern Europe and too weak for Germany and northern allies.

Instead crisis countries, in particular Greece, should be offered a euro exit-ramp to a new, devaluable currency.

Alternatively, northern European countries, led by Germany, could leave to adopt a new “nordeuro”.

While the AfD says it dislikes German dominance of euro zone economic policy, it tells voters that Berlin's voice is not being heard in Europe. Thus it wants greater German weight in votes at the European Commission and at the European Central Bank.

It wants Europe’s new banking union rolled back, leaving states ultimately responsible for their banks.

AfD critics accuse it of courting nationalist, populist resentment and point to policy papers demanding a more nationalist German foreign policy. AfD leaders say attempts to brand its members as extreme right are proof that critics cannot counter its arguments.