"There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency system involved."
- Ludwig von Mises

Tuesday, January 25, 2011

Angela Merkel's Support for the Euro

Recently, Angela Merkel stated that Germany will do whatever it takes to save the Euro.  Germany, after all, has profited immensely from the Euro, well, at least up to the crisis.  Here is a case in point, showing trade between Greece and Germany, before and after Euro introduction:

One could argue that German exports to the periphery were vendor financed to a degree - very similar to the US-China trade relationship.  But is it sustainable?

But Merkel faces her own domestic challenges.  And so, as Mark Grant of Southwest Securities points out, the "jury is still out" on Merkel's ability, or opinion, on handling the Euro crisis.


OKL said...

i dont think Merkel can come out explaining to the voters why the EUR is good for Germany, simply because if she did explain it, the public in other EU countries would get really annoyed.

Misthos said...

Very true, it would validate what some on the periphery have been complaining about.

OKL said...

if im not wrong, i think there's quite a few european elections this year right?

will be interesting to see if other parties manage to gain some popularity.

i really dont know how the European issue will play out; i mean, together with the rest of the world, there is a crapload of bonds out there looking for buyers. i'm pretty sure that if it wasnt for the central banks, those rates will be much higher than they are today.

having said that, these are all political issues. i wonder what might be enough to cause a break in political discussions.