Five months ago, Zero Hedge first boiled down the math of the European bailout as follows: "The Fatal Flaw In Europe's Second "Bazooka" Bailout: 82 Million Soon To Be Very Angry Germans, Or How Euro Bailout #2 Could Cost Up To 56% Of German GDP." And while everyone was assuming Germany would be delighted to go down for the proverbial insolvency "ride" one more time, we strongly urged not to make that assumption, as we posited the fundamental equation running through the mind of every German: is the opportunity cost of keeping the euro high enough to threaten either a complete German economic meltdown (fiscal support), or hyperinflation (massive ECB intervention), and that the outcome would not be the one the Eurocrats wanted. While at the time our speculation was seen as preposterous, it has since become mainstream (just look at the Eurostoxx). The latest observation on just this comes from Grant Williams' latest "Things that make you go hmmm" where he says: "France and Germany need to be prepared to foot the bills that are coming due and, by ‘France and Germany’, I mean Germany because, with a budget deficit of 7.1%, and debts of 83% of GDP, France WILL be downgraded shortly and will be in no position to chip in to the EFSF as their own ship begins to take on a serious amount of water in the shape of rising borrowing costs. That leaves the intransigent Germans. With a budget deficit of 4.3%, a record of having exceeded the mandated deficit limit in seven of the past eleven years a debt-to-GDP level of 85% and climbing, not to mention an economy that is on the verge of a recession (I told you not to MENTION that), Germany may soon have to go and sit somewhere quiet in order to reflect on what to do next." And so on.
Full note (pdf)