The end of the German export miracle - and what it means for the euro

Jeff Randall, writing in the Telegraph, thinks that the end of the euro in its present form is near:

On current form, Greece will be paying nearly 10 per cent of its GDP in interest by 2015. Portugal’s 10-year borrowing costs are close to an unsustainable 7 per cent and would be even higher were it not for market manipulation by the European Central Bank. And Spain is sitting on 700,000 unsold homes, 20 per cent unemployment and a 33 per cent deterioration in competitiveness against Germany since the euro was formed.
Yes, the system is working a treat. No luck required, just more money. But from where will it come? The bail-out fund of 750 billion euros, cobbled together by the European Union and IMF, will not be enough. It may buy time, allowing Athens, Lisbon and Madrid to play the wheel for longer than they should, but their financial attrition grinds on.
Of the six eurozone countries that still have triple-A credit ratings – Austria, Finland, France, Germany, Luxembourg and the Netherlands – only one really matters: Germany. As the EU’s economic powerhouse (GDP growth was 3.6 per cent in 2010), it has become the lender of last resort. So far, Berlin has paid up, but 62 per cent of Germans now oppose further rescue packages for EU losers. Faced with choosing between Europe’s olive belt and her own electorate, Chancellor Angela Merkel will turn off the aid tap.

Randall thinks that a new strong euro will follow the secession or expulsion of the weak euro members:

Thus the euro, as we know it, is finished. Which is why… I’m a buyer of the euro. When the crunch comes – and the laggards secede or are expelled – the residue will be a group of solvent nations, unhindered by chronic budget and trade imbalances. As veteran investor Jim Rogers explains: “The more I look at it, the more I see Germany taking control of the euro.” That’ll do nicely.

Read the entire Telegraph article here.

Of all the comments to Randall´s article, this one is the most interesting:

"Of the six eurozone countries that still have triple-A credit ratings – Austria, Finland, France, Germany, Luxembourg and the Netherlands – only one really matters: Germany."

And when the Chinese house of cards collapses, as it will, so will the German export miracle.

This is exactly where the danger is from Germany´s point of view. Of course, nobody in Germany is speaking about what the bursting of the China bubble will mean for the present German economic boom, but Merkel and other key decision makers must be aware of this very real danger. In such a situation Germany will most certainly not be able to continue as paymaster of the eurozone. Then there will be a totally new ball game in Europe ....