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Edward Harrison — Germany’s coalition talks are sowing the seeds of the euro’s breakup

Summary:
For years now within Germany’s policy circles, there have been many who have pushed for an ‘expulsion’ or ‘voluntary exit’ mechanism for the Eurozone. I am now hearing this position advocated by FDP head Christian Lindner, a potential finance minister in the new German governing coalition. I believe this affects Italy the most and sets up an existential crisis down the line for the EU.... The upshot here is two-fold. First, in a crisis situation, a politically independent hardline German finance minister will not toe the line. Angela Merkel must deal with a more robust power center and cede ground. Second, if and when we do have a crisis, the lack of a common deposit insurance scheme is going to create capital flight that will quicken the pace of crisis. And because of Europe’s new

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For years now within Germany’s policy circles, there have been many who have pushed for an ‘expulsion’ or ‘voluntary exit’ mechanism for the Eurozone. I am now hearing this position advocated by FDP head Christian Lindner, a potential finance minister in the new German governing coalition. I believe this affects Italy the most and sets up an existential crisis down the line for the EU....
The upshot here is two-fold. First, in a crisis situation, a politically independent hardline German finance minister will not toe the line. Angela Merkel must deal with a more robust power center and cede ground. Second, if and when we do have a crisis, the lack of a common deposit insurance scheme is going to create capital flight that will quicken the pace of crisis. And because of Europe’s new bail-in rules that will force bank creditors to suffer losses before any bailout occurs, political implications could be severe....
Mike Norman
Mike Norman is an economist and veteran trader whose career has spanned over 30 years on Wall Street. He is a former member and trader on the CME, NYMEX, COMEX and NYFE and he managed money for one of the largest hedge funds and ran a prop trading desk for Credit Suisse.

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