Why Germany Won’t Let the Euro Die
There has been a lot of talk that the eurozone will break up and Germany will end up going back to its previous currency, the mark. Although this could happen, that’s not the most likely scenario. Germany will do everything it can to save the euro.
I recently saw an interesting chart in New York Times. Take a look at the chart below. It compares unemployment in Germany with the rest of the eurozone, including the peripheral countries (Portugal, Italy, Spain, etc…), over the last five years.
Over the last five years, unemployment has declined in Germany. Since the German economy is highly dependent on export, there’s no question the euro has played a key role in boosting the economy and driving unemployment lower.
If Germany were to move back to the mark, it would have a much stronger currency than the euro. Its exports would become way too expensive. It would be a disaster to its economy.
Germany has a good reason to fight for the euro. They will have to pay a hefty price for that in the form of financing other troubled nations until they get their houses in order. But at the end, I think leaving the eurozone would have a much higher cost.
Although the euro will most likely remain very weak in the coming months, it will survive this crisis in the long-term. Germany won’t let it fail.