Unbelievable? The "German Solution" to the Eurozone Crisis ...

Ok, suspend your disbelief for a moment as we run through an unlikely resolution to the debacle that is the eurozone ...

Yes - Greece has elected (again) to beat around the bush and hope the important nations can agree on something ... anything to alleviate their struggles and keep them in the euro. 

Germany may not care.

Yes - Spain is officially seeking a bailout that's not going to alleviate the original need for a bailout ... much less revive an insolvent banking system burdened by a housing collapse and a Sovereign debt. 

Germany may not care.

Yes - Italy is next on the list and their $2 trillion debt dwarfs that of the other bailees. 

Germany may not care.

Yes - the proposed firewalls are woefully inadequate despite refusals of policymakers to admit a shortage of to-be-necessary bailout funds. 

Germany may not care.

Naturally, you'd begin to think the countries on the bailout list would begin dropping like flies ... right out of the eurozone. After all, if the EU, ECB, and IMF could afford to pay for the sins of the debtors then they probably would have by now.

What's standing in the way?


Thus, Germany must go.

Right now the zone-wide deliberations include proposals for Eurobonds and debt pacts. German Chancellor Angela Merkel has pretty much said "hell no" to Eurobonds in her lifetime. And German Finance Minister Wolfgang Schauble has said the European treaties prohibit sharing of liabilities, i.e. no debt pact.

Increasingly, the debtor nations are teaming up to put the screws to Germany so they'll do their "fair share" to keep the monetary union together and, in fact, take steps towards a "much needed" fiscal union of sorts. Even France and their recently elected President Francois Hollande are at odds with Germany.

When it comes down to it: Germany is looking to maintain as much of its sovereignty as possible (the German Constitutional court is funny that way!)

But there is really only one path to truly fixing a system that's bred a complete and unsustainable economic imbalance:

Debt-led growth must end è competitiveness must increase è real growth must happen

Sorry to say it, but the chances those things happen with the institution of a debt pact or Eurobonds is slim to none (and you know where slim just went ...) Assuming officials push back on any German proposal that calls for an end to the era of debt, are there any other steps to be taken?

We've said it all along - the problem is the common currency.

The euro system has incentivized debt-led growth and imbalances among member nations. The only thing to do is loosen up the straight jacket that is the euro.

Of course, the dissolution of the euro is Armageddon in the eyes of European and global officials - it simply will not be tolerated.

But what if Germany was the country to exit and the euro remained the paper of the debtors?

Germany would reinstitute the deutschemark and see the relative value of the euro depreciate. That foreign exchange dynamic then makes eurozone debtor nations more competitive (regionally and globally) and would eventually catalyze production and growth in said nations.

Naturally, Germany would lose its captive market to which it unloads its goods.

Initially, this seems like a tough pill to swallow. But Germany has been looking to branch out and send its exports outside the struggling zone. Is it possible Germany will say goodbye instead of accepting the demands to become "more euro"?

It's something we'll continue to monitor - we want to keep you up to speed so you're not left holding your hat when the day (week/month/year) of reckoning arrives ... CLICK HERE to find out exactly why and how ...