Is Germany the next victim of the euro crisis?
Posted by Michael Schuman
CuriousCapitalist.blogs.time.com
Monday, November 28, 2011 at 2:16 am
Reading about developments in the euro zone these days makes me recall the old American TV sci-fi show Lost in Space. Every time the Robinson family got itself into trouble, their robot would swing its arms and flash its lights and yell “Danger! Danger!” Perhaps we need to send this robot through the streets of Berlin, Paris, and other major euro zone capitals, since the leaders of Europe apparently aren't getting the message on their own. More and more countries are getting dragged down into the euro zone debt crisis as its leadership continues to dither. Much like the Robinson family, they just seem lost, wandering from place to place, with no clear progress on getting where they need to go.
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Yet amid all of these dramatic events, the most stress-inducing actually came from a very unexpected source: Germany. On Wednesday, a German government bond auction failed, raising only about 60% of the targeted amount. Some analysts tried to explain this event away as a result of technical factors and special circumstances, and thus not a statement on Germany's creditworthiness or demand for Bunds. Perhaps that's true. But we can't ignore the implications of that auction either. Could Germany get embroiled in the debt crisis as well?
Of course, Germany is already embroiled in the debt crisis, just in a very different way from Italy or Spain. As the euro zone's largest economy, and one of its strongest, Germany is under increasing pressure to employ its financial muscle to save the euro zone. As I noted in this week's TIME magazine, the only real way to solve the debt crisis is through deeper European integration. But that inherently means Germany stepping in to support the monetary union. In other words, whether the euro survives depends on German willingness to use its resources to keep it alive. Either way, there are consequences for Germany. And not all of them are good.
Full story: http://curiouscapitalist.blogs.time.com/2011/11/28/is-germany-the-next-victim-of-the-euro-crisis/?xid=gonewsedit&google_editors_picks=true
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