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Angela Merkel Warned That Germany Could Abandon The Euro

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http://www.guardian.co.uk/world/2010/dec/03/angela-merkel-germany-abandon-euro

German chancellor said to have made comments during an EU summit dinner in Brussels at the end of October

The German chancellor, Angela Merkel, has warned for the first time that her country could abandon the euro if she fails in her contested campaign to establish a new regime for the single currency, the Guardian has learned.

At an EU summit in Brussels at the end of October that was dominated by the euro crisis and wrangling over whether to bail out Ireland, Merkel became embroiled in a row with the Greek prime minister, George Papandreou, according to participants at the event's Thursday dinner.

Merkel's central aim, which she achieved, was to win agreement on re-opening the Lisbon treaty so a permanent system of bailout funding and investor losses could be established to deal with debt crises that have laid Greece and Ireland low and are threatening Portugal and Spain. The Germans also called for bailed-out countries to lose voting rights in EU councils.

At the Brussels dinner on 28 October attended by 27 EU heads of government or state, the presidents of the European commission and council, and the head of the European Central Bank, witnesses said Papandreou accused Merkel of tabling proposals that were "undemocratic".

"If this is the sort of club the euro is becoming, perhaps Germany should leave," Merkel replied, according to non-German government figures at the dinner. It was the first time in the 10 months since the euro was plunged into a fight for its survival that Germany, the EU's economic powerhouse and the lynchpin of the euro's viability, had suggested that quitting the currency is an option, however unlikely.

Merkel's spokesman Steffen Seibert would not comment on her remarks today. But the threat, he said, was "not plausible. The chancellor sees the euro as the central European project, wants to secure and defend it and the government is not at all thinking of leaving it," he said. "Germany is unconditionally and resolutely committed to the euro."

Interesting that this has come out over a month later. Is the Guardian behind with reporting this or are the Germans playing games aiming to get the upper hand in the bailout talks?

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Dead by the end of the year I reckon.

If it does fail big implications for all of those long term contracts written in Euro's.

It would also trigger the mother of all bank runs with funds probably heading from the PIIGS into the German banking system.

Edited by interestrateripoff

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If it does fail big implications for all of those long term contracts written in Euro's.

It would also trigger the mother of all bank runs with funds probably heading from the PIIGS into the German banking system.

Capital controls will be introduced first.

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Capital controls will be introduced first.

I think the entire financial system will have to be shut down. It all depends on how it's going to break up. Total failure, the PIIGS being ejected, or the Germans and French walking out.

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Merkel or the Euro? Either way, if you can set up an online bet on this, I will gladly take the other side even at large odds ...

Don't forget that there are one or two German interest groups contesting the legality of the bail-outs.

I think the judgement is scheduled for February. The first case contends the illegality of the Greek bail-out and the second is an injunction against the Irish slush fund.

The bail-outs are illegal in EU treaty terms, no question. So, a forthcoming wobbly. Merkel is not openly supporting these actions, but it does play into her hands if she wishes. Her party (and her power) has the most to lose if Germans have to eat austerity for the sake of other nations.

Merkel is piggy in the middle of course, because the Irish bail-out saved German banksters but bashed her electorate. Real rock and a hard place. (The Austrian banks are on the hook for the Eastern periphery too.)

Anyway, it's all unworkable and that Trichet tricoteur, whatever his name is, wants Brussels to control the lot.

I do think Merkel has the upper hand, since there are fewer and fewer countries every day who can guarantee a Euro . . . . bond, coin or whatever. She just has to make up her mind.

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The verdict of the constitutional court will be interesting. The key euro points seem to be:

Greece will never be able to pay back the bailout it has received. It seems doubtful the economy will ever return to growth / job creation in the current euro structure.

Ireland has virtually no chance of paying back it's bailout. It seems unlikely the Irish economy will grow / create jobs for the foreseeable future considering the level of fiscal retrenchment proposed in the current euro structure.

Spain & Portugal will cease to be able to borrow from the bond markets at acceptable levels in interest in the next 12 months.

Portugal has barely grown for a decade and is drowning in debt.

Spain has a major unemployment / housing bubble / competitive problem. Economic data from the region is being manipulated the true state of the economy is unknown.

The only buyer of Bonds for these countries seems to be the ECB.

Austerity will likely cause unending recession, unemployment and eventually economic and political collapse in these countries. A return to growth and job creation is the only viable long term solution.

No one in leadership of the Eurozone has come up with a solution to facilitate growth outside of the Eurozone core or solve any of the above problems.

The Eurozone core will probably wait until these countries are near collapse to do something.

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The verdict of the constitutional court will be interesting. The key euro points seem to be:

SNIP

The Eurozone core will probably wait until these countries are near collapse to do something.

I can't argue with any of that. No black swans needed.

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  • 312 Brexit, House prices and Summer 2020

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