The Strong and the Weak in Europe

In the last week or two we received the impression that Germany was about to save Greece from bankruptcy.

If we are to believe yesterday’s STRATFOR analysis, that is now what is going to happen.

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This is an excerpt.

What made us look at this in a new light was an interview with German Finance Minister Wolfgang Schauble on March 13 in which he essentially said that if Greece, or any other eurozone member, could not right their finances, they should be ejected from the eurozone. This really got our attention. It is not so much that there is no legal way to do this. (And there is not; Greece is a full EU member, and eurozone membership issues are clearly a category where any member can veto any major decision.) Instead, what jumped out at us is that someone of Schauble’s gravitas doesn’t go about casually making threats, and this is not the sort of statement made by a country that is constrained, harnessed, submerged or placated. It is not even the sort of statement made by just any EU member, but rather by the decisive member. Germany now appears prepared not just to contemplate, but to publicly contemplate, the re-engineering of Europe for its own interests. It may not do it, or it may not do it now, but it has now been said, and that will change Germany’s relationship to Europe.

A closer look at the euro’s effects indicates why Schauble felt confident enough to take such a bold stance.

Part of being within the same currency zone means being locked into the same market. One must compete with everyone else in that market for pretty much everything. This allows Slovaks to qualify for mortgage loans at the same interest rates the Dutch enjoy, but it also means that efficient Irish workers are actively competing with inefficient Spanish workers – or more to the issue of the day, that ultra-efficient German workers are competing directly with ultra-inefficient Greek workers….

The paradigm that created the European Union – that Germany would be harnessed and contained – is shifting. Germany now has not only found its voice, it is beginning to express, and hold to, its own national interest. A political consensus has emerged in Germany against bailing out Greece. Moreover, a political consensus has emerged in Germany that the rules of the eurozone are Germany’s to refashion. As the European Union’s anchor member, Germany has a very good point. But this was not the “union” the rest of Europe signed up for – it is the Mitteleuropa that the rest of Europe will remember well.