Tuesday, 7 August 2012

Super Mario vs German Stubbornness

In my past articles, I have stated that the only trustworthy person in the crisis-involved countries is Mario Monti. And he proved me right! Yesterday afternoon he asked for more flexibility from Angela Merkel concerning the way the EU tackles the crisis and for "moral support not financial". While his popularity has dropped significantly from 70% to about 40%, Monti seems to be the only European leader who understands the situation more than anyone else. He introduced measures to reduce Italy's huge deficit and is going along just fine without so far any assistance from Troika or the EU.(I really hope I don't jinx the guy!)

In yesterday's statement, he stated a fact which Berlin does not want to acknowledge: there is growing resentment in the South towards the Germans and Europe. He states that if borrowing costs do not fall until next year's elections then the newly-elected government may be a Euro-sceptic one. This is not only true for Italy as most Southern countries have started viewing favorably to an exit from the Union. If exits from the Eurozone begin to occur, then Germans can be proud of producing an unprecedented collapse of the world economy, which will be far worse than the Great Depression.

Germany has become one of the greatest beneficiaries of the crisis, since it is considered a safe investment, and it has maintained an extremely low interest rate for its bonds. It is reported that for July bond issues the yield was -0.06%. Yeah, that's right. People are losing money in order to invest in Germany! Even Wolfgang has stated that interest rates are unusually low. If that wasn't enough, it seems like Germany is actually saving most of the money it has obtained from bond issued to use it as a windfall! (for details read this) These savings are about to reach three digits soon (and that's in billions). And of course, Wolfgang, a direct descendant of the German arrogance and stubbornness which led to two World Wars and an economic collapse in the first half of the previous century (and after conversations with many Germans, I thought of being extinct) states that Germany does not have to apologize for financial markets trusting them. Hmm, even if that is because you steadily hold everyone else down Wolfgang?

Paris and Berlin speak of austerity: they were the first ones to break the pact for Stability and Growth in 2005. Yet, the EU did not (and will never) fine them. It looks like laws and pacts are like spider webs; small animals get trapped in them, while larger ones break through. Both countries are in favor of a low Euro. It helps the boost their exports significantly and this is very helpful as, although their economies are stronger than all of the Southern ones, they are still weak. Meanwhile, if a country or more exits the Union, the consequences for both countries will be severe. Losses from a Greek exit could reach 66bn for France and 89bn for Germany and the global impact of it would reach 1 trillion euro. (for details on these calculation read this) You still don't care about Grexit Rösler?

You may easily imagine what will happen if Spain, Italy or both exit the Union. Germany will say goodbye to those hard gathered savings from the low interest rates. Conclusion and moral of the story above: Act to save the Union before it's too late for everyone.

No comments:

Post a Comment