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Germany and France Divided: End of The Road for The Euro? New Beginning for the Deutsche Mark?

Politics / Euro Nov 18, 2011 - 11:52 AM GMT

By: DK_Matai

Politics

Best Financial Markets Analysis Article1. Divisions between Germany and France have widened significantly in regard to a common Eurozone solution as borrowing costs outside of Germany rise to euro-era records;

2. The German government is standing firm in its opposition to deploying the European Central Bank (ECB) for the bailout of faltering Eurozone sovereigns;


3.  Germany has drawn a clear line in regard to their commitment to the European Financial Stability Fund (EFSF) beyond which there will be no further pan-European support for bailouts;

Deutsche Mark Resurrection?

4.  This means that the fate of the sovereign debt of each Eurozone member nation now rests with that nation and therefore that country may be at the mercy of the global financial markets;

5.  The German finance ministry and the Bundesbank are acutely aware that their own banks are in need of substantial recapitalisation assistance especially as they have now begun to suffer severe downgrades and restricted access to capital markets;

6.  It is clear that the German government neither has the mandate nor the capacity to embark simultaneously on debt pooling with sovereign nations like France, Italy and Spain whilst bailing out its own technically insolvent financial institutions;

7.  One core scenario under discussion envisages the printing of new money by the ECB in trillions -- historically of great concern to the German people -- at which point Germany exits the euro and resurrects the Deutsche Mark;

8.  There appears to be no reason for either the government of Germany or France to announce this decisive development until the Eurozone bond markets begin to boil over, which could prove to be a dangerous strategy;

9.  Global media are already reporting different aspects of this widening rift between Paris and Berlin; and

Conclusion

10.  If Germany were to resurrect the Deutsche Mark, the consequences may prove not to be benign either for the Eurozone or Germany.  Germany has been absolutely consistent in its opposition to sovereign debt pooling and the printing of money, which are impossible for it to undertake in the absence of thorough Eurozone reform.  It seems that other Eurozone nations are slow to realise the unambiguous nature of the German stance.  Germany consequently faces the unpalatable position of appearing to have reached the end of the road for the euro project, arguably through no fault of its own.  The resurrection of the Deutsche Mark is likely to be a regrettable turn of events for the Germans, but one that is unavoidable while their political neighbours insist on maintaining the illusion that debt sharing is a viable prospect for the Eurozone.

What are your thoughts, observations and views? We are hosting an Expert roundtable on this issue at ATCA 24/7 on Yammer.

By DK Matai

www.mi2g.net

Asymmetric Threats Contingency Alliance (ATCA) & The Philanthropia

We welcome your participation in this Socratic dialogue. Please access by clicking here.

ATCA: The Asymmetric Threats Contingency Alliance is a philanthropic expert initiative founded in 2001 to resolve complex global challenges through collective Socratic dialogue and joint executive action to build a wisdom based global economy. Adhering to the doctrine of non-violence, ATCA addresses asymmetric threats and social opportunities arising from climate chaos and the environment; radical poverty and microfinance; geo-politics and energy; organised crime & extremism; advanced technologies -- bio, info, nano, robo & AI; demographic skews and resource shortages; pandemics; financial systems and systemic risk; as well as transhumanism and ethics. Present membership of ATCA is by invitation only and has over 5,000 distinguished members from over 120 countries: including 1,000 Parliamentarians; 1,500 Chairmen and CEOs of corporations; 1,000 Heads of NGOs; 750 Directors at Academic Centres of Excellence; 500 Inventors and Original thinkers; as well as 250 Editors-in-Chief of major media.

The Philanthropia, founded in 2005, brings together over 1,000 leading individual and private philanthropists, family offices, foundations, private banks, non-governmental organisations and specialist advisors to address complex global challenges such as countering climate chaos, reducing radical poverty and developing global leadership for the younger generation through the appliance of science and technology, leveraging acumen and finance, as well as encouraging collaboration with a strong commitment to ethics. Philanthropia emphasises multi-faith spiritual values: introspection, healthy living and ecology. Philanthropia Targets: Countering climate chaos and carbon neutrality; Eliminating radical poverty -- through micro-credit schemes, empowerment of women and more responsible capitalism; Leadership for the Younger Generation; and Corporate and social responsibility.

© 2011 Copyright DK Matai - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


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