Why Germany Is Unlikely to Write the Check

Phoenix Capital Research's picture




At the end of the day, every EU solution/bailout/ intervention hinges on whether or not Germany will write the check.


The EBC can promise this and that, but unless Germany’s signature is on the check, all of this is just posturing and verbal intervention.


With that in mind, it’s worth considering just how much Germany would be willing to spend. Historically the single largest transfer payment ever made by one country to another was the Marshall Plan, which saw the US make a transfer payment of slightly over 5% of its GDP to Europe as aid following WWII.


Given this, it is highly unlikely Germany will foot the bill for a larger amount than this on a per-GDP basis. True, Germany has promised more than this in the form of its supposed contributions to various EU bailout funds, largely due to the fact that German banks are exposed to the PIIGS and other problem countries of Europe.


However, I sincerely doubt that when the tab is drawn up and the funds are actually needed, Germany will actually write the check for an amount greater than 5% of its GDP (roughly €140 billion).


Thus, the key issue is whether the tab comes due before Greece or Cyprus (or Italy at this point) else leaves the Euro. Angela Merkel is up for re-election this year, which is a big reason why Germany was demanding depositor confiscation to help fund the Cyprus bailout (she cannot afford to look soft).


Moreover, the German economy is proving weaker than originally forecast.


Economic advisers to the German government on Monday slashed their forecast for 2013 growth to 0.3 percent from 0.8 percent, blaming a sharp fourth-quarter contraction, and said weaker foreign trade and investment would weigh on growth.


The advisers, traditionally known as the "wisemen", predicted capital investment would drop by 3 percent this year and saw foreign trade subtracting 0.3 percentage points from German gross domestic product (GDP).




Between Merkel’s re-election bid, and the German economy weakening, bailing out Europe is going to be a lot more politically unsavory than it has in the past. The question now is whether Cyprus or someone else calls Merkel’s bluff.



If you’re an individual investor worried about what Europe’s Crisis really means for your portfolio, we’ve published a FREE Special Report outlining exactly that. It’s titled, What Europe Means For You and Your Savings.


In this report, we outline the risks Europe’s banking crisis holds not only for those in Europe, but for savers around the world. We also explain how this crisis will most likely unfold, including which areas are most at risk in the financial system. And we cap it off by listing multiple backdoor plays on Europe that investors can use to profit from Europe’s Crisis.


You can pick up a FREE copy here:




Thank you for reading!


Graham Summers


Your rating: None

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Tue, 03/26/2013 - 15:57 | 3378594 Dan Conway
Dan Conway's picture


What do you mean Germany won't write the check?  None of these central bankers and dictators care.  Printing checks and worthless currency is easy.  I think the question is why do people think these broken promises are worth anything? 

Look at what the US government is buying (other than votes) - they are trading worthless paper for ammo.  Get it?

Tue, 03/26/2013 - 14:53 | 3378176 poldark
poldark's picture

According to ZH if you take into account all the loans and other EU obligations Germany's debt is 130% of GDP.

Tue, 03/26/2013 - 14:52 | 3378168 steveo77
steveo77's picture

Funny how Cyprus is fixed, and the most popular post on my blog is "Maui Fun" which is a good one, by the way, if thinking of going to Maui, this is the real deal shite to do.


Tue, 03/26/2013 - 14:46 | 3378133 poldark
poldark's picture

I don't know why everyone says Germany is bailing out country A or B.

All countries contribute to the EMS.

Germany 27%

France 21%

Italy 17%

The Dutch pay most per capita.

BTW Italy had to borrow money on the markets at 7% to lend to Spain at 3%.

Tue, 03/26/2013 - 14:42 | 3378122 Joe moneybags
Joe moneybags's picture

Thanks for the timely article, Mr. Summers, and the warning about European economic trouble. Is Tyler aware of this stuff?

Tue, 03/26/2013 - 14:43 | 3378115 JenkinsLane
JenkinsLane's picture

Graham Summers is not fit to shine Chris Whalen's shoes.

I hope ZH is being sufficiently compensated for posting this schmuck's drivel.

Tue, 03/26/2013 - 13:26 | 3377772 LawsofPhysics
LawsofPhysics's picture

Hey Graham, look at bund yields!!!  Germany is already writing the fucking check!!!

Tue, 03/26/2013 - 13:20 | 3377733 tony bonn
tony bonn's picture

merkel would cut off her left tit to save the euro.....she was installed by the rockefeller nazi cabal and will do their bidding till the day she dies.....you never never ever pay heed to what a politician says in public - ever.....you watch actions....

whose troops have occupied germany since ww2?? yes, the puppet masters of hitler - the rockefeller nazis....they are not going to give up the eu after all of these years - it will simply not happen....the next escalation will be occupation of dissenting nations by "nato" forces....

Tue, 03/26/2013 - 13:05 | 3377677 Fix-ItSilly
Fix-ItSilly's picture

Germany,  the Netherlands, France and the UK  already wrote the loans, which were converted to buying their exports.  They don't want to honor that they have half of the responsibility for the bad loans.

This is all the same European nonsense that spawned the forming of the United States of America.  The USA treats debtor and borrower as equals.  Each has to share the pain if their deal goes south.  Europe worships wealth and still seeks a place for its "blue-bloods".

Tue, 03/26/2013 - 13:04 | 3377675 Buck Johnson
Buck Johnson's picture

Germany's economy has to be doing bad with everyone else around them in recession.  Also I don't think they will write that check, they may jawbone and say it was done but in the end I think they still will take the deposits of people under the 100,000 euro.

Tue, 03/26/2013 - 13:27 | 3377780 LawsofPhysics
LawsofPhysics's picture

Please, germany is already writing the check.  negative interest rates is fucking confiscation by another name.  look at the bund yields.

Tue, 03/26/2013 - 12:54 | 3377620 Passage
Passage's picture

Tongue has no bones.

Tue, 03/26/2013 - 12:56 | 3377619 Passage
Passage's picture

Actually Cyprus reminds me of Argentina.

Tue, 03/26/2013 - 12:50 | 3377599 Fuh Querada
Fuh Querada's picture


Tue, 03/26/2013 - 13:47 | 3377868 digitlman
digitlman's picture

In other words, another contribution from Phoenix "Research".

Do NOT follow this link or you will be banned from the site!