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Germany - The odd-man in Europe

Posted in by Dean Burns on: 05/10/2011

At a seminar this week Anatole Kaletsky, who you might know as a regular writer for the Times on economic matters, made some interesting observations on the very subject of the German voter:

  • Anatole Kaletsky feels strongly that if the Euro were to break-up then it would not be because Greece, Spain or Portugal get pushed out. He completely discounts this scenario because if one country is pushed out then there will be a domino effect with years of law-suits. Rather he feels the only possibility of a Euro break-up is if Germany were to be pulled out by its citizens. In which case the legacy Euro would clearly be a much weaker currency.
  • Anatole sees Germany as the odd-man in Europe. The Government and the business elite are committed to the Euro, providing it is driven by rules laid down by Germany. Germany has been laying down lines in the sand, but then has been pulled over these lines into areas in which it feels uncomfortable. This has led to a major disagreement between the Bundesbank and the European Central Bank; with the latter currently supported by the German business elite who still want to preserve the Euro. Anatole feels that there is an 80% likelihood that this time the Bundesbank will not win, but the Bundesbank does have significant and growing support amongst the German voters.
  • Anatole forecasts the bail-outs will therefore continue, debts will be internationalised and the European banking system will be re-capitalised. There is however a problem timing inconsistencies; with the legislative time required to set up the legal and institutional requirements to create the European fiscal federation being in order of 2 years or more.

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