If it is right that German economy is going bad, and after the this autumn elections this hidden truth will come clear, then the most bad of the Euro crisis is still ahead. Germany is the most strong fulcrum of the Euro zone, and without its support the common currency will simply disintegrate.

Germany is the main donor of money for the European salvation funds, that at the moment are saving the Euro. Some countries (like Greece and Portugal) can not survive without these funds. Troubled countries like Spain and Italy are at any moment at the edge of the crash. France is becoming more and more unstable under the socialist rule of Francois Hollande. So Germany, along with some smaller economies like Austria, Netherlands and Finland, are the only stable part of the Euro zone. And German stability was due to the permanent economic growth that has brought the confidence of investors.

In fact confidence is the main resource on Germany. Mathematically it is a deeply indebted country, and still has budget deficit. There is no financial reason investors to believe too much in Germany, based on pure accounting results. But they do believe, and the reason of this is the stable economy, its growth and austerity thinking of Angela Merkel.

If this is to change then the confidence may be lost very fast. This will lead to increasing interests on German bonds. And this will undermine the salvation funds. Additionally if Germany is to make its own spending cuts, the people's support for saving other countries will decline. This will immediately crush Greece, and soon after that - Portugal. With German borrowing costs rising, this will skyrocket the interests of weaker countries and will lead them to default.

In fact European stability is very fragile and depends on much factors that all must be active for the stability to survive. There must be austerity reforms in Euro zone, there must be German growth at the same time, there must be political support for financing the troubled countries at the same time, there must be confidence in Euro as a currency - that it will survive, there must not happen any serious economic shocks...

Much of these requirements become at stake with any problems - even small ones, in the leading EU economy. And as some analysts say - these problems are obviously coming.

The inconvenient truth is that EU missed the chance to use the German strength and ability to support others, to make the needed reforms. Troubled countries (for instance Greece) preferred just to consume the bailout money, in exchange for imitating reforms. So the reforms were not done, and soon the capability of Germany to help will expire. So the moment of bitter truth is ahead.

There can not exist a strong EU and a strong Euro with Germany being again “The Sick Man of Europe”. It was in this situation before Gerhard Schroeder's reforms during his 2 mandates. But then it was a time of a global growth and EU economy was still growing. Today with Germany risking to become "ill", the logical question that follows is: "Who is the healthy one in EU"...?

Generally Germany can survive any crisis. Just like Schroeder proved, reforms are possible and lead to good results. But a crisis in Germany means other countries will not survive. Even big ones. So post election German future will may be the trigger of the final super crisis in EU. The Euro will either disintegrate, or will be inflated with ECB remaining the only source of money, issued from printing presses. If Germany decides to save the stable currency, then a Deutsche Mark will be restarted and inflation will devastate the weaker currencies (in fact almost all out of The New Mark). In all cases the price of European narrow-mindedness will start to be paid. This price is not small. It is much higher than the price of missed and rejected reforms...

Dobri
Jan 9th 2013