Mercurial talent Mario Balotelli sent German hopes of conquering Europe down the drain in their semi-final defeat to Italy last month. The Italians emerged as dark-horses to win the tournament after a fine display from the Manchester City striker involving a clever headed goal, a tremendous top corner finish, and an ostentatious display of masculinity as he threw his shirt to the floor and rocked a pose of stern iron glory. A true Italian stallion.
All the speculation surrounding the raging debt crisis in the Eurozone has focussed on the possibility of one of the peripheral states leaving the currency union. They are often described in reckless terms such as Club Med or the PIIGS (Portugal, Italy, Ireland, Greece and Spain), and attributed with derogatory characteristics such as profligacy, irresponsibility, fragility, and perhaps most cuttingly, naivety.
Whereas the German economy is almost always accompanied by the kind of adjectives that you would associate with…a tank, or…the industrial revolution, or…a Volkswagen. However, the inherent ‘robustness,’ ‘efficiency,’ and ‘strength,’ of anything German could be thrown into doubt if the European economic powerhouse was to leave the Eurozone.
“But Germany’s not going to leave the Eurozone, right?” I hear you say.
And yes, in my opinion you’d be right, they’re not going to leave the Eurozone.
However, there is a growing camp of Euro dissenters in Germany who feel that Deutschland is getting a bad deal as it sits comfortably in control of – the majority of – the most developed continent in the world. They read in the paper about the German taxpayer stumping up the money to support ailing economies in the South of Europe; countries with burning hot sunshine, crystal-clear waters, three-hour long lunch breaks, siestas, tavernas, and the scent of fresh olive trees.
A certain constituent of the German tax-paying labour force has grown sick and tired of supporting ‘lazy Spaniards,’ ‘Italian mommas boys,’ and ‘careless Greeks.’ Not to mention ‘drunk Irish Leprechauns,’ don’t get them started on them…
But it’s not just angry citizens, whose country has majorly benefitted from the weak Euro currency, who are talking of Germany abandoning the 17-nation bloc.
The yields on German Bunds have fallen to levels so low that investors are now paying Germany for the privilege of lending the country money. Some economists have taken this as a signal that markets may be anticipating a German exit.
The usual reason for markets sending bond yields below zero is extremely low economic confidence; by this I mean that investors are so worried about the possibility of losses in other assets that they are willing to accept small losses in order to safeguard their funds.
However, another reason for placing money into a negative investment is the chance that it might turnaround and become a profitable venture. If Germany were to leave the single currency then German Euro Bunds would be re-dominated into Deutsche Marks, which would then sharply appreciate in value giving investors a handsome profit.
It would, however, be naive of the Germans to think that by leaving the currency union their country would be free of the burden of the profligate south. Conversely it would be the southern Euro states that would be free of the burden of an export-damagingly strong currency, a tunnel-visioned central government, and a judgemental issuer of harsh austerity.
As the German Deutschmark quickly re-aligned itself with the true value of the German economy, the German economy would slowly begin to re-align itself with the rest of Europe. Without the unfair advantage of a one-size-fits-all-comparatively-low-valued currency the powerful German export industry would slow down as competitiveness in Europe would begin to even out.
In conclusion a German Eurozone exit would be as advantageous for Italy, and as dismal for Germany, as when Mario Balotelli smashed Deutschland out of Euro 2012 last month in Poland.