This Means War

Regular reader likely has noticed that I've characterized much of what's gone on with the Euro and Greece as a bullet-less WWIII, instigated by Germany. Provocative, on purpose. Not that I expected the mainstream pundits to echo such a view.

Until today.

But Greece is not alone in trying to bend or break the rules. Germany and France missed what were supposed to be mandatory fiscal targets in 2003, and France continues to fall short. Neither has been punished.

"There are rules, but some countries are more equal than others," Mr. Lafond, the Paris researcher [EuropaNova], said. "This is obviously unfair. Countries should not be treated differently according to their size."

And the Germans, of course, remain judge, jury, and executioner.

Here is a thorough history. Much of what is obvious, Germans' insistence on fleecing its poorer neighbors and citizens, is documented. Oh well.

But with the advent of the euro, things started to change. Incomes at the top kept rising, with gains for the top 10 percent of earners continuing apace for the next decade as shareholders reaped record profits. At the bottom, however, there was a sharp dip that eventually left incomes exactly where they started at the beginning of the 1990s.

And, I repeat (well, the author does):

But the bankers in Berlin know that each weak country that leaves the eurozone now is likely to push up the value of the euro. This would increase the value of German savings, but it would also harm exports, and at the moment Germany needs them more than ever.

The Germans want to have it both ways:
1) richest nation in Europe, based on exports
2) all the rest of Europe poor and on that fixed Euro rather sovereign currencies

But an exporting nation depends on:
1) poor workers
2) cheap capital
3) rich importers

As production becomes evermore capital intensive, poor workers lose their appeal. There's much less advantage to a 10% reduction in 10% of cost than in 80% of cost. Just ask China.

Germany is caught between, and appears ignorant of, a rock and a hard place. It is never wise to kill that golden goose:

German exports to Greece took a tumble in 2013, final calculations by Germany's statistics office (Destatis) showed Monday.

It said the year's shipments to Greece totaled only 4.7 billion euros ($5.2 billion), marking a 41-percent drop from the volume recorded in 2008 before the peak of the global financial crisis. Back then, German exports to Greece amounted to 8 billion euros.

With Portugal, Spain, and Italy next in line for the gallows, what are the Germans to do? If they keep culling the weak nations from the herd, the hard Euro devolves to stronger (and fewer) hands, thus losing its raison d'etre.