George Liu's  Instablog

As the hubbub over a potential Greek exit from the Eurozone starts to die down due to New Democracy's victory, the attention now has become focused on Germany, arguably the healthiest and most important member of the Eurozone right now.

Now, there are calls for Germany to leave the Eurozone due to, among other things, its opposition to the "mutualization and monetization" of the eurozone debt, as stated by Anatole Kaletsky, an analyst at the GaveKal consultancy. He goes on to note that a German exit would be "very bullish for practically all global risk assets."

Although a German exit from the Eurozone could have some benefits, it seems Germany is intent on staying, even signaling it could compromise. Although Germany remains steadfastly opposed to eurobonds, German Chancellor Angela Merkel has stated that she may be open to a redemption pact. Moreover, international markets today were significantly boosted by reports that Merkel would allow the use of the eurozone bailout fund to purchase the bonds of troubled EU states. Of course, as FT Alphaville points out, this isn't something extremely significant as the charters of both the European Stability Mechanism (ESM) and European Financial Stability Fund (EFSF) already allow the purchasing of sovereign debt of EU states. Regardless, the German government seems more willing to be flexible on the policies of mutualization and monetization of the eurozone debt; if so, this would provide no impetus for Germany leaving the Eurozone, regardless of what the subsequent consequences are.