- Germany’s Finance Minister Blames ECB For German Trade Surplus; Why the Eurozone Will Destruct
Fireworks are going off in Germany again in yet another battle between Wolfgang Schaeuble, Germany’s finance minister, and the ECB. Schaueble dismissed a suggestion this week by ECB head Mario Draghi that Germany should use fiscal room for manoeuvre to decrease its export surplus.
Reuters reports Germany’s Schaeuble blames ECB for German Export Surplus.
Why the Eurozone Will Destruct
Germany will pay one way or another for the massive imbalances between the creditor and debtor Eurozone countries. Eventually Spain, Greece, or Italy will realize it is impossible for them to pay back what is owed.
Once that realization sets in, some country will default on their euro-denominated liabilities. Beppe Grillo’s Five Star Movement in Italy is on board with that idea already. There are only three possible paths at this point.
Three Alternative Paths
1. Germany and the creditor nations forgive enough debt for Europe to grow
2. Permanently high unemployment and slow growth in Spain, Greece, Italy, with stagnation elsewhere in Europe
3. Breakup of the eurozone
Germany will not allow #1. It is unreasonable to expect #2 to last forever. The only door left open is door #3.
The best move would be for Germany to leave the eurozone. Germany is in the best shape to suffer the consequences. Unfortunately, the most likely outcome is still a destructive breakup of the eurozone, starting in Italy or Greece.