JoetheInvestor's  Instablog

The assumptions made so far about the Euro crisis are that Greece is in the poorest financial condition in the Eurozone, followed by Portugal, Spain and Italy. France is somewhere in the pack catching up, and England is also out there but not in great shape. What about Germany?

The assumption about Germany is that it is the glue that holds the Euro together, and they have the resources to bail out everyone and anyone. Is this really true?

For starters, who does Germany sell their exports to? Europe. (1)(2) Is the rest of Europe still buying German goods in a recession? The other large export markets for Germany are China and India, but their growth has been slowing down recently, and there are measures to prop up both economies with interest rate cuts and/or stimulus. (3)(4)(5)

So if Germany cannot sell their exports as much as they used to, where else would they get the money to offset all of these bailouts? Germans cannot likely consume all of their own products, so what other options are there? If exports are not there, taxes will not be there. If they borrow money, Germany will be in the same boat as the other countries, just later in time due to a much lower interest rate.

What about the willingness of Germans to execute the bailouts? There were arguments in the past consisting of why and how Germans can pay for everyone else's debt. (6)(7)(8) As the stakes go up, and the debt bills climb, wouldn't such talk get more frequent and gain more traction? The recent disagreements between Germany and France will not help the situation. (6)(8)

Bring back the Mark? The reality may be closer than it appears.

Sources:

1) http://www.viewsoftheworld.net/?p=2098

2) http://www.spiegel.de/international/germany/german-exports-fall-in-april-2012-a-837694.html

3) http://www.bloomberg.com/news/2012-06-04/german-stocks-decline-automakers-fall-on-china-slowdown.html

4) http://www.bloomberg.com/news/2012-07-25/asian-currencies-drop-led-by-won-as-europe-crisis-intensifies.html

5) http://www.bloomberg.com/news/2012-06-18/india-unexpectedly-holds-rate-as-surging-prices-curb-cut-scope.html

6) http://news.xinhuanet.com/english/business/2012-06/26/c_131676727.htm

7) http://www.dailymail.co.uk/news/article-2178085/Germanys-coveted-AAA-credit-rating-slashed-negative-eurozone-debt-crisis-continues-escalate.html?ITO=1490

8) http://news.gnom.es/business/moodys-warning-fuels-german-resentment-over-euro-bailouts

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.