Germany Could Pull Out of the Euro Before Spain is Even "Saved"

Phoenix Capital Research's picture


As I’ve assessed in earlier pieces, neither the Fed, nor the IMF, nor the EFSF, nor the ECB has the firepower or the political backing to prop up Spain or the EU.


This ultimately leaves the ESM, the permanent European Stability Mechanism… which technically doesn’t even exist yet (it’s supposed to be ratified by July 2012).


That’s right… the bailout fund which is meant to SAVE Europe doesn’t even exist yet. And it’s not clear that it will anytime soon either…


Indeed, in order for the ESM to be ratified it needs the individual EU member states that will contribute 90% of its capitalization to first ratify it on an individual basis.


Here’s the list of countries that represent that 90% of capital as well as the status of their individual ratifications and the percentage of funding they are to provide.




Percentage of Capital





















































To summate the above chart succinctly… only four of the required 17 countries have even ratified the ESM (it’s supposed to be completely ratified in July 2012).


Moreover, you’ll note that the PIIGS as a whole are meant to contribute 36% of the ESM’s FUNDING!!!! Spain and Italy alone are meant to contribute 30%!!!!

So… Spain is supposedly going to be bailed out by an entitythat doesn’t even exist yetfor which Spain is mean to contribute 12% of the funding. And to top it off… Spain hasn’t even ratified the fund itself!!!


More importantly, neither has Germany. And it’s not clear that it will either.


To whit, Germany’s ratification of the ESM is buried in legislature that includes, among other things, the proposal of a financial transaction tax, which is extremely popular with the Social Democrat Party (SPD), the main opposition party to Chancellor Angela Merkel’s Christian Democratic Union (CDU).


Thanks to recent elections, which saw Merkel’s CDU party get trounced (again, German voters are FED UP with bailouts), the SPD now controls 11 of Germany’s 16 states.


This is a big deal because the SPD is playing hardball regarding the passage of the ESM legislation due to the fact that Merkel is not viewed to have been serious about implementing the transaction tax proposal (which the SPD is pushing for along with various other growth measures for the Germany economy).


Merkel is scheduled to meet with the opposition leaders tomorrow. If they cannot strike a deal it is quite possible that Germany won’t be able to ratify the ESM legislation before the July 1 deadline.


The SPD made it clear that it is willing to risk this just a few weeks ago:


German SPD Pushes Growth Saying Merkel’s Crisis Policy Failed


The timetable for passing the fiscal pact and associated legislation to set up the permanent bailout fund, the European Stability Mechanism, is “completely unrealistic,” Steinmeier told reporters in Berlin today. The government underestimated the mechanics of getting the two-thirds majority in parliament needed to pass the legislation and it is “very ambitious to assume” both bills pass before the summer recess, he said.


As I have stated many times in the past, politics trumps financial and economic issues in Europe. Germany’s next Federal Election is scheduled for the autumn of 2013. And it is clear that the SPD is viewing the ongoing EU Crisis as a platform with which to claim Merkel’s policies have failed (much as Francois Hollande did to Nicolas Sarkozy in France).


So, we have to consider that the SPD may in fact be willing to let Germany get an international black eye by failing to ratify the ESM legislation by its required deadline (in order to further tarnish Merkel’s image).


By the look of things, this may be the case:



German court may delay Europe's new bailout fund

The German government and opposition reached a deal on Thursday on growth that will allow parliament to approve the euro zone's permanent bailout scheme next week, but Germany's top court may delay the rescue fund's start date scheduled for July 1.


Folks, this is not gloom and doom… it is reality. The mega-bailout fund which is supposed to backstop the EU doesn’t exist yet and is likely not to exist for several months as various countries legislative bodies work through the paperwork and legal ramifications.


I don’t know how else to put this, but Europe is finished. There simply is not enough capital to meet the demands (Spain alone needs €300+ billion just to recapitalize its banks). And that’s just Spain. Throw in Italy, Greece (which continues to be a blackhole for bailout funds) and France (which is going to be facing its own fiscal cliff in the near future) and it’s GAME OVER.


Months ago, I forecast that Germany will walk before it goes “all in” on the EU to prop up everyone else. I believe that day is fast approaching. Unless Angela Merkel wants to commit political suicide, she will be forced to protect Germany’s domestic issues. Whether this comes as a result of Germany pre-emptively leaving the Euro or doing so after one of the PIIGS has already left remains to be seen. But in the end, Germany WILL WALK IF IT HAS TO.


On that note I believe we have at most a month or two and possibly even as little as a few weeks to prepare for the next round of the EU Crisis. On that note, I recently published a report showing investors how to prepare for this. It’s called How to Play the Collapse of the European Banking System and it explains exactly how the coming Crisis will unfold as well as which investments (both direct and backdoor) you can make to profit from it.


This report is 100% FREE. You can pick up a copy today at:


Good Investing!


Graham Summers


PS. We also feature numerous other reports ALL devoted to helping you protect yourself, your portfolio, and your loved ones from the Second Round of the Great Crisis. Whether it’s a US Debt Default, runaway inflation, or even food shortages and bank holidays, our reports cover how to get through these situations safely and profitably.


And ALL of this is available for FREE under the OUR FREE REPORTS tab at:







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ich1baN's picture

Thank you sir for the free reports; you are excellent.

shovelhead's picture

Cold war bunkers and hidden DM's...

This is getting very Ludlumesque.

Will financial apocalyse thrillers push vampire porn off the popular best-sellers lists?

Nah. In America, vampire porn is king.

Fantasy wins over reality.

Count de Money's picture

Can Germany leave the Euro quickly? You bet.

About a year ago, I saw a report that the German govenment declassified the existence of a network of secret bunkers that were constructed and maintained during the cold war. What was in these bunkers? Money. Actually an alternate currency of the Deutschmark. The idea was that if the Soviets tried to undermine the German economy by counterfeiting the currency, the Germans would just replace the old notes with the banknotes they had stockpiled. They eventually dismantled and disposed of the stockpile in 2002.

Why is this relevant? Because there have been rumors for years that the Germans never disposed of the old Deutschmark bills and coins and that all the old currency is stored secretly in warehouses around the country.

boogerbently's picture

What do we tell Germany?

It didn't work for try it !

shovelhead's picture

What do you think?

Mutti gets tossed under the Bailouts Forever Euro Mystery Bus and the printing continues?

Kill a German and save a Pig? or

Makin bacon?

Stay tuned for (cheezy organ music swell) The Euro Saga.

carbonmutant's picture

Germany doesn't have to leave.

All Merkel has to do is hold her ground and the chaff will separate from the wheat.

The Alarmist's picture

A girl can only dream ... aahhh!

FartInTheWind's picture

Germany will not pull out of the Euro.

Merkel was spotted during the last Bilderberg meeting, so she is part of the game.

A major crisis may have to be created first to convince the German sheeple to accept Eurobonds though...

aleph0's picture



" Unless Angela Merkel wants to commit political suicide, "

Aren't you are forgetting that most of our unpopular politicians end up with a new job in the EU !

cifo's picture

... which pays the same salary, but it's tax free.

pmm009's picture

If Germany unilaterally leaves the zone, how does it realize losses on Target 2?  At a 10K foot level, seems like they will spread pain over a decade rather than take a half trillion dollar one time hit.  I understand this is a gross simplification, but we need more focus on what the end game is and less on day to day color from people who are not in the particular room or on the particular phone calls.   Today, Obama needs a deal in Europe more than Merkel does, so you can imagine the phone conversations between Treasury, IMF, ECB, Bund, Merkel etc..

bigkahuna's picture

For what it is worth, it seems to me that Germany has been busy over the last couple of years putting up financial firewalls between itself and the rest of the EUROzone.

I believe that Germany has been ready to let the rest of the countries in the EURO go it alone for about a year now. It is a matter of when Germany's puppet masters want them to walk. Yeah they have puppetmasters just like the rest of us. 

When their masters give the word, they are outta there in my opinion.

Winston of Oceania's picture

"take a half trillion dollar one time hit" So you think it ends there? They are better off without a currency shared by those who have yet still to honestly enumerate their debt and deficits.

Tirpitz's picture

No chance the German money masters will vouch for an exit from the - for them - perfectly funtioning euro zone. As long as it's other people's money landing in the coffers of the export machinery and the bankrupt banking corporations, they will stick with the course charted. Any uprising is strictly verboten in Germany.

JuicyGrabs's picture

Had a chat with a German friend few days ago. He`s saying around 70-80% of the Germans are against providing bailouts to PIIGS.

The wildcard in the 2013 elections is the Pirate Party who`s very anti-bailout and could prove to be another Syriza.

pagan's picture

Hey dumbass,

Germany lost ww2, so Merkel is a tool for the anglo-americans.

Is this very basic fact so hard get?

PS: May I remind you that not a long time ago, Germany got back its eastern part. The Deal? Accept the Euro.

StellarChartist's picture

+3 for militant ignorance.  keep it up, you'll work it out yet.


smb12321's picture

It's embarrassing to read such drivel but Merkel was an East German communist apparatchik whose daddy was a "Stasi" pastor.  She was a Marxist youth leader and spoke Russian fluently.  That's about the least pro-UK/US background imaginable.  If she suddenly morphed into an anglo-american "tool" then miracles still occur.

Merkel wants to protect (in order) Merkel, Germany and last, but not least, the EU.

semperfi's picture

Wow!  Permanent bailout fund!  Free money for failing!  Hey, even I can do that!  Bring it on baby! 

Negro Primero's picture
...oops! "The other risk for the SNB: Will German Bund yields double ?"

'In the latest post we started discussing the implications of a German euro exit for the Swiss National Bank, this time we will look on another risk: The rising German Bund yields.'

falak pema's picture

esm will exist on July 1, barring supreme court ruling. THe banking union will then become possible down the road if Greece gets ejected in August. Spain bank recap is now evaluated at 62 B euros, where 100B have been allocated and will become operational July 1 via ESM. 

Any talk about Germany leaving the Euro zone is like Virgin airways and Branson landing on the moon in July. 

JuicyGrabs's picture

There were people thinking along same lines prior to WW2, that somehow Germany was backed into a corner bending over to the French and British after the Versailles treaty. History took an interesting turn though.

Now even Stratfor, the private CIA is hinting towards a possible political union between Russia and Germany. Russia is already working towards closer ties to Germany. Their online English pravda is full of emo articles about a new Ribentrop Molotov pact.

.. we trully live in interesting times.

matrix2012's picture


read also in

Russia and China in Prophecy

America’s status as the world’s lone superpower is rapidly fading. Other nations and groups of nations are angling to fill the void. Rising in the East is an emerging power bloc of tremendous potential-in manpower, economic heft and military might. Its growing presence is intensifying global competition for resources and for geopolitical influence. Where will this trend lead? You can know! Biblical prophecy provides a remarkable, penetrating preview of Asia’s future!


Table of Contents

Chapter 1:  The Emerging Asian Superpower

Chapter 2:  Russia Frightens Europe—and Fulfills Bible Prophecy

Chapter 3:  What the China Miracle Means

Chapter 4:  Japan’s Place in the Future

Chapter 5:  Asia in Prophecy



smb12321's picture

This has to be one of the dumbest rumors around.  Why in the world would Merkel join Germany with a country going to the dogs?  It would be like the PIGS only on a bigger scale.   Russia - as far as I know - has never been one for conciliatory council nor is she a large trading partner of Germany. She is not financially responsible nor democratic.  Plus, she is losing population faster than Germany, shrinking about as fast as humanly possible. The only thing she can give (since Russia makes nothing) is natural resources. 

JuicyGrabs's picture

Russia also has a declining population, but even so, it has a surplus of workers, both unemployed and underemployed. If the workers cannot be brought to the factories, the factories can be brought to the workers. In short, there is substantial synergy between the Russian and German economies. Add to this that the Germans feel under heavy pressure from the United States to engage in actions the Germans want to be left out of, while the Russians see the Americans as a threat to their interests, and there are politico-military interests that Germany and Russia have in common.

NATO is badly frayed. The European Union is under tremendous pressure and national interests are now dominating European interests. Germany's ability to use the European Union for economic ends has not dissipated but can no longer be relied on over the long term. Therefore, it follows that Germany must be considering an alternative strategy. Its relationship with Russia is such a strategy.

Germany is not an aggressive power. The foundation of its current strategy is its relationship with France in the context of the European Union. The current French government under President Nicolas Sarkozy is certainly committed to this relationship, but the French political system, like those of other European countries, is under intense pressure. The coming elections in France are uncertain, and the ones after that are even less predictable. The willingness of France to engage with Germany, which has a massive trade imbalance with France, is an unknown.

However, Germany's strategic interest is not necessarily a relationship with France but a relationship with either France or Russia to avoid being surrounded by hostile powers. For Germany, a relationship with Russia does as well as one with France. An ideal situation for Germany would be a Franco-German-Russian entente. Such an alliance has been tried in the past, but its weakness is that it would provide too much security to Germany, allowing it to be more assertive. Normally, France and Russia have opposed Germany, but in this case, it is certainly possible to have a continuation of the Franco-German alliance or a Russo-French alliance. Indeed, a three-way alliance might be possible as well.

Germany's current strategy is to preserve the European Union and its relationship with France while drawing Russia closer into Europe. The difficulty of this strategy is that Germany's trade policies are difficult for other European countries to manage, including France. If Germany faces an impossible situation with the European Union, the second strategic option would be a three-way alliance, with a modified European Union or perhaps outside of the EU structure. If France decides it has other interests, such as its idea of a Mediterranean Union, then a German-Russian relationship becomes a real possibility.

A German-Russian relationship would have the potential to tilt the balance of power in the world. The United States is currently the dominant power, but the combination of German technology and Russian resources -- an idea dreamt of by many in the past -- would become a challenge on a global basis. Of course, there are bad memories on both sides, and trust in the deepest sense would be hard to come by. But although alliances rely on trust, it does not necessarily have to be deep-seated trust.

Germany's strategy, therefore, is still locked in the EU paradigm. However, if the EU paradigm becomes unsupportable, then other strategies will have to be found. The Russo-German relationship already exists and is deepening. Germany thinks of it in the context of the European Union, but if the European Union weakens, Russia becomes Germany's natural alternative.

Read more: The State of the World: Germany's Strategy | Stratfor  and
Uncle Remus's picture

What part of "gas and oil" did you not understand?

Uncle Remus's picture

I knew listening to those Red Army Choir CD's on those BFE excursions would come in handy someday.

falak pema's picture

Merkel  is not Hitler. If anything its PAx Ameicana that is playing for its hegemonial survival. You're looking at your telescope through the wrong end. Wake up. An alliance between <germany and Russia post USSR is on the cards since Schroeder took on the North Sea gas pipeline project. 

John_Coltrane's picture

I believe both Russians and Germans are well aware of how the last "alliance" between Hitler's Germany and Stalin's Russia went and are not likely to repete that error.  Germans still have nothing but comtempt for druken, undisciplined Russians (and Southern Europeans) and Russians don't particularly like humorless, tight-ass Germans (those stereotypes exist for sound statistical and cultural reasons).

Culture determines destiny which is why the EU experiment is such a failure (see Michael Lewis' Boomerang for numerous details)

Tirpitz's picture

Munich - Minsk - Moscow, an interesting new axis. And a logical and healthy one. Would have the Anglosaxens shaking in their overleveraged boots.

smb12321's picture

Yeah, real healthy.  Belarus is the most backward and authoritarian state in Europe although Russia is giving her a run for her money.  I can see Germany teaming up with those economic power houses - LOL

fajensen's picture

Consider the structure of EU: We have an elected Parliament of reject politicians who can decide precisely nothing and then we have the Commision, that decides everything, and is unelected, unaccoutable and picks its own members, wery much the Duma and the Politbureau in Sovjet times. And there are thought you are not allowed to express and opinions that are illiegal - and special police to monitor and enfoce that.

I see a great overlap of values here ... and Belarus would be just the place for those black jails that the EU will want since Obama The Great has them!

Ghordius's picture

I'm starting to be annoyed by all this disinformative propaganda - here some FACTS



27 members, all Sovereign (2) Nations, all with an elected (3) Parliament each


27 governments, usually appointed (4) by a Majority (5) in each Parliament

- The EU itself is organized in a way that in part resembles more a "typical" corporation than a typical confederation.

- The typical confederative part is the legislative (6) part, by an:

Elected EU Parliament than has to approve or reject whatever the EU does (by the way, the EU has a budget around 1% of the GDP of the 27 members).

- The "typical" corporation part is the executive part, by the two "boards":

"Board of Directors" = EU Council (the 27 Prime Ministers/Head of Governments) that gives directives (7)

"Executive Board" = EU Commission, is appointed by the Council, 27 members, one from each nation, they have to be approved by the EU Parliament, follows up on the directives of the Council.

- EU Legislation is authored following the directives of the Council by the Commission and approved or rejected by the EU Parliament.

- EU Treaties receive a similar treatment, though they have to be approved by the national parliaments (and, where provided for, go through referendums)


(1) if you have a problem with democracy, please check first if you have a problem with your local (mis-)application or a problem with democratic principles per se

(2) Sovereign = is independent, has an army and can engage into or break international treaties

(3) elected per proportional method - compare with the first-around-the-post method, for example in the UK and in the US

(4) appointed = can be recalled and substituted - but for example France votes directly for it's President, that is Head of State and Head of Government and can't be substituted by Parliament

(5) Majority in Parliament = more than half of Parliament forms the Majority by coalition agreement between parties. If the agreement breaks, a new Majority has to be formed or a new election has to be called

(6) note that the Sovereigns are not bound by any EU decision if they don't want to - there are many cases of vetos, notably by the UK. in a pinch, a member can just leave. threathening to leave is also a diplomatic option

(7) it sometimes meets in a more specific fashion, for example when the Finance Ministers are sent to represent their governments. The Council has one "President" that is actually more something like a Secretary of the Council.

gmrpeabody's picture

" a logical and healthy one"

Like the Hatfields and Mccoys..., a match made in Heaven. LOL

StellarChartist's picture

so you see europe as "strong as iron" and playing the empire game? seriously? 

the only thing getting smashed to pieces here is the american nuclear hegemon, don't worry about europe, it does weird things to itself all the time.

the dragon in the article are the nukes; and the kings?  c'mon, who's the home of the 1%'s? 

and jesus? please.. he lives in you or would have to have been born in the 80's but maybe you'll have him land in an alien spaceship for the olympics?

ok, that's enough for one cheek :)

Alea Iactaest's picture

Does it make sense for Germany to leave the Euro? Sure if you're concerned about protecting savings. Luckily that is not the problem here. The real issue is that Germany (i) effectively controls the EU, (ii) requires a weak currency to support its export economy, (iii) is under consderable pressure from the US and UK to cave, and (iv) utlimately will not want the world to blame it for the economic collapse that will occur if it doesn't consent.

Nevermind that said economic collapse is inevitable, the timing is still to be decided and our masters are not yet ready for it.

Of interest, however, is Frau Merkel's comment that EU members must be reasonable, leaving open the option to leave the EU if Germany decides that matters have become too unreasonable. If that occurs is it more likely that Berlin will align with Washington or Moscow? Good thing we have some real estate interests there.


PS - Graham do you really think you add to your credibility by tossing around a bunch of acronyms to start the article? Is your intent to show you are "in the know"? IMO, it just seems pompous and silly.

fajensen's picture

Germany wants to run Europe - just as always - and the British, French and Americans does not want Germany to run Europe. The difference is that the Germans are now trying with Credit and Bureacracy instead of Tanks - and are being sabotaged with similar weapons.

Alea Iactaest's picture

Sorry, forgot what prompted me to post in the first place:

Exclusive: Secret EU summit document shows first step to banking union

A classified draft of next week’s EU summit conclusions is the first step on an emerging “roadmap” to a banking union, pooling debt via eurobonds and political union via EU treaty change over the next 10 years