There have been rumors lately that Germany has raised the possibility that they might leave the euro. But like most of the talk coming out of Berlin in recent months it’s just that – talk. After all, why in the world would Germany ever want to leave this currency union? Although inherently flawed, there is always a great winner in single currency systems. In this case it is undoubtedly Germany. They have their lowest unemployment rate in 18 years, a booming economy, zero inflation, a monopoly on the export market in Europe and total control over the ECB.
click to enlarge
Although their enviable position in the eurozone (as the primary trade surplus nation) is highly favorable there are other reasons for Germany to fight for the euro’s survival. They have a vested interest in making sure that the periphery nations do not default on debt that is held largely by German bankers. In addition, the euro project is largely a creature of the German political regime. As I’ve frequently mentioned there is simply too much political will invested in the euro thus far to allow it to unravel.
Those are the primary three reasons why Germany will not abandon the euro. They have benefited enormously at the expense of the periphery nations. Germany will talk tough, but do everything in their power to ensure that this German prosperity continues. The biggest risk to the euro and Germany is that the periphery nations begin to revolt against their German bankers & their ECB. Thus far the Germans have played their cards well. They have convinced the periphery nations that austerity is good for them and that Europe is here to help them.
Make no mistake. Germany will do everything in its power to keep the poor on their knees. After all, in a single currency system there must always be a winner and loser. Germany knows they are the winner and they will do everything they can to ensure the losers never realize this.