Iron Lady of Europa

The deepening banking crisis in Spain, weak Irish and Portugal economies and a pivotal June 17 Greek election that could make or break the nation's ties with the euro zone; all this point to the increasing possibility of a Euro break up. Although, the existence of the euro looks bleaker each passing day, I still feel that Euro will survive. And one of the reasons behind my belief is Germany’s financial and political risk attached to the failed Euro.

According to the latest Deutsche Bundesbank report, Germany’s GDP grew at a comparatively strong rate of 0.5% and its unemployment is the lowest since last 20 years. This is when the whole European neighborhood is trying to survive each day. With over $1.4T (trillion) worth of goods and services exported, Germany remained the world’s second largest exporter behind China (but of course). And this is possible because of a ‘weak’ euro.

Thanks to the Euro zone crisis, euro has lost its value which has made Germany's export cheaper and therefore competitive. The demand of the German Bunds is so high that the yields have touched an all-time low for the most of Bundebank’s offerings. If Germany had Deutsch Marc, it would have been so much over valued because of the Euro crisis that there was no way Germany would have achieved the high level of exports, which in turn would have increased the unemployment rate and depressed the overall economy.

Since the beginning of the Euro crisis (2009/10), European leaders have scheduled almost a dozen ‘emergency talks’. The result of the last round of emergency talks was a ‘strict limit’ on the budgets of the 17 Euro using countries. Any country that broke the rules would suffer automatic penalties. Interesting thing about this meeting was not the actual outcome, but acceptance of majority of German demands.

Although there are some doubts with regards to the policies of ECB, EU and individual Euro states, one thing is very clear Germany has taken the driver’s seat in Europe (to France’s dislike!!). Surprisingly, for the first time in 60 years, Germany is the clear leader in Europe.

Till now the Iron lady of Europe- Chancellor Angela Merkel, is just doing enough so that the peripheral countries will survive, but if it came to the existence of Euro, I am sure she will go all out to save the Euro because it will be in Germany’s financial and political interest.

The Great War of Europe just ended, and Germany has won.