The mainstream media narrative - that Germany is ready and prepared for Grexit and that it is no longer a threat to financial stability - is all hype, according to German opposition finance minister Joachim Poss. As Bloomberg reports, all that is mostly posturing for an electorate tired of the aid and angst Greece has demanded since 2010. Simply put, the potential for Euro instability from a Grexit is a detriment to Germany's massive benefits from the single currency - "Europe can’t afford a Greek exit," Poss concludes, complacency by Merkel is "playing with fire."
A reading of the German press suggests Chancellor Angela Merkel is at peace with the idea of Greece quitting the euro. Der Spiegel says her government views that as a manageable outcome; Bild reports that officials are preparing for the prospect. Lawmaker Michael Fuchs says Greece is no longer a threat to financial stability.
All that is mostly posturing for an electorate tired of the aid and angst Greece has demanded since 2010. In fact, Germany has no interest in risking the dissolution of the single currency that a Grexit could entail.
That’s because the status quo is a boon for Germany economically and politically. Indeed, the biggest European economy benefits more than most of its fellow euro members from the single currency. While a Greek departure alone may not end the euro, the risk would be of contagion through the bloc’s financial markets that forced others out.
If it had to return to the deutsche mark, German exporters, which account for about half of gross domestic product, would become much less competitive and Merkel’s prized current-account surplus would shrink. Inflation would weaken further.
On the geopolitical stage, Germany would also see its star dimmed. Former U.S. Treasury Secretary Timothy F. Geithner last year identified German Finance Minister Wolfgang Schaeuble as the go-to-guy for the U.S. during Europe’s crisis. Russian President Vladimir Putin would also welcome strains on the continent.
“Europe can’t afford a Greek exit,” Joachim Poss, the Social Democrats’ deputy finance spokesman in the German parliament, said in an interview this week. Suggestions by allies of Merkel that the 19-nation currency bloc could weather Greece’s departure amount to “playing with fire,” he said.
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It appears for now that investors believe Grexit is increasingly possible...