From Ambrose Evans-Pritchard at The Telegraph. As always, he is a little sensationalist, but after controlling for that factor, it’s still a worrying read.
Clearly, the Germans are losing patience with the foundering EU project, as well as the importunate southern states that are threatening to drag Germany into the quicksands of fiscal crisis. Living in Germany, I can attest that these sentiments are fairly widespread.
I feel that the break with the EU bureaucracy will have to come about sooner or later. It is a question of timing and the repercussions are unknown, but will probably be rather destabilizing. Will the eurozone break up? Will each country retreat into its own currency, or will we be looking at two currency blocks: a northern and a southern? What will the implications for debt liabilities be? And what about the sheer mechanics of switching currency?
From Ambrose Evans-Pritchard at The Telegraph:
The German economy slowed drastically over the early summer and may be on the cusp of a double-dip recession, dashing hopes that Europe’s industrial engine would eventually lift EMU’s southern bloc out of slump.
This is bad news. I believe that the prognostication will come to pass. One way to avoid it would be to expand German consumption, but this is easier said than done. German savings rates have been high for decades. The German consumer has an innate distaste for excessive debt, and indeed, the German system of consumer purchase discourages purchase on credit. Cash is used to much greater degree than in the Anglo-Saxon economies. Card purchases tend to be through debit rather than credit cards. Given its historical memory and sheer logistics, this is unlikely to change any time soon.
From Spiegel Online:
“Is the party over for the German economy, which has been enjoying its strongest boom since reunification? Sentiment indicators and company forecasts point to a slowdown caused in part by weakening activity in China. Fears are also growing about the US outlook and the simmering euro debt crisis.”