gainspainscapital.com / By Graham Summers / March 11, 2013
Back in 2011, I predicted that when push ultimately came to shove, Germany would leave the Euro before it picked up the full tab. The reasoning is simple: the Germany population will not stand for rampant monetization. They know how that ends (Weimar) and they will kick out any politician who seems to support the idea.
German Chancellor Angela Merkel has walked a tightrope over the last few years of keeping the EU together without infuriating the German populace to the point of having to abandon ship.
To do this, Merkel has maintained a firm stance of “we’ll write the check provided conditions are met” much as a parent would give a child his or her allowance provided the child performed its chores satisfactorily. In the case of Germany, the “chores” are required conditions of austerity measures and budgetary requirements in exchange for bailout funds.
By doing this, Merkel is able to play hardball on an economic front (having failed to meet its German-required financial targets Greece had to wait an additional six months to receive another installment of its Second bailout) without appear too hard-nosed on a political front (she continually pushes to keep the Euro together, expressing a willingness to help other nations… as long as they meet her budgetary requirements).
The policy has thus far been a success with Merkel’s approval rating soaring to its highest level since 2009 (before her re-election bid). However, her political party has begun to realize that there will be consequences for defending the Euro no matter what the cost, suffering an unexpected defeat in January of this year.
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