One can still see millionaire playboys in their speed boats bouncing on the sea, off the coast of the Cote d’Azur; and the fashion salons of Milan and Paris are still doing quite well. But things are no longer as rosy as they might seem in the Eurozone.
Recently, there has been talk, unofficial of course, about the possibility of Germany pulling out of the system it had helped to create. It hasn’t happened as yet. But if they go ahead and take the advice of George Soros, the billionaire currency speculator and hedge fund trader, the revellers in next year’s Oktoberfest in Munich would probably be paying for their Weissbier and Bratwurst in the good old Deutschmark that saw Europe’s richest country through the economic miracle that left the rest of the world stunned. The issue now faced by Angela Merkel is: should Germany continue indefinitely to bail out countries in the Eurozone that have rejected austerity and insist on living beyond their means? Many Germans have started to say no. Not only because it will provoke a recession in their own country and will end up with the fatherland coughing up around seven per cent of its gross national product on an annual basis; but because… well… why the hell should they continue to play the godfather when instead of being grateful, some of the defaulters resent Germany’s continual role as the power that continues to dictate their fiscal policy.
The message that is being regularly delivered to Berlin by the French, the Irish, the Spaniards, the Italians, the Portuguese and the Greeks is that they are a little sick of the austerity that is being shoved down their throats by the Germans. Their argument is simple. Of course, you cannot shrink a debt burden by simply shrinking the deficit. Another approach simply has to be found. A glance at the election results in France and Greece has indicated that there is a strong backlash against the austerity approach that Germany has been advocating. One of the casualties of the ballot box in France was Nicolas Sarkozy, who turfed out over 40,000 members of the Romany clan — the gypsies of Europe, who had originally come over from Romania and Bulgaria.

The question now is: what is likely to happen to the Eurozone if Germany decided to call it a day and pulled out of this artificial association of countries — some of which had vastly disparate views and ideas on how a country should be run? To start with, major banks all over Europe will have to be bailed out, and countries such as Portugal, Italy and Spain are going to need huge amounts of financial assistance to stay afloat. If Germany pulled out of the club, the Euro would certainly collapse, bond yields would go through the roof and without the fatherland to come to their rescue, countries could end up in all sorts of internal troubles like labour disputes and strikes for higher pay. Greece would be the major candidate for default and would be ripe for revolution. George Soros, however, believes that Germany went a little too far in bailing out Cyprus and has suggested more than once that Merkel should reconsider her reluctance to Eurobonds, which would ensure that all member countries’ borrowings would be guaranteed by the whole of the Eurozone and not just one country. German economists are aware of the fact that such a move would not only require an amendment to the treaty, but it would also increase the cost of borrowing for Germany. Eventually, common sense will prevail.
Published in The Express Tribune, October 5th, 2014.