Germany Going It Alone In The Eurozone

Includes: EWG, IMF
by: David Fry

Germany Eurozone

Two days in a row and we have better manufacturing data from Germany. On May 7th Factory Orders gained 2.2% from prior .6% and today May 8th Industrial Output gained 2.8% from prior .3%. At the heart of these gains were auto sales from Germany's top three carmakers and their suppliers responding to thriving demand in China, with first-quarter profits at Bayerische Motoren Werke AG, Volkswagen AG (VOW) and Daimler AG (DAI) all beating analyst estimates.

With Greece now threatening to stop repayments to the troika (ECB) (EMU) &(NYSE:IMF) and Spain announcing bailouts of its domestic banks and the new French administration wanting a "do-over" of previous agreements, the durability of the 17 nation European Monetary Union is challenged. Germans may feel overwhelmed by their leadership responsibilities with their own citizenry more willing to abandon the entire arrangement. German Finance Minister Schaeuble stated immediately after the Greek murky election results: "They'll have to honor their agreements period."

Spain doesn't have the resources to bailout their banks without assistance from the troika either. To put it bluntly, buying time with printed money and fresh debt won't cut it anymore.

At the same time with elections dominating the developed world it's compelling for those in power to keep things going until all the votes are in. After all sick economies won't win you any votes even if printing money to buy is a fool's errand. The fallout will be borne by those next in power or those not eligible to run again.

With all that said we view a monthly chart of the iShares German Country ETF (NYSEARCA:EWG).

The ETF Digest has no current position in EWG.

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