After a lively start to the year we appear to have reached a period whereby we can catch our breath before, no doubt, the fun and games begin once more. The main event in February was the stand-off between the newly elected Greek government and the rest of the Eurozone which, as we suspected, reached some kind of resolution with each side claiming the upper hand but which has bought that precious commodity, time.
We say we suspected a resolution, not only with the benefit of hindsight, but because we were reminded at a presentation that we gave in early February that the importance of the Eurozone to Germany is often underestimated. Germany calls the shots for the other members, of that there is little doubt, but it is generally overlooked that a break-up of the Eurozone would be disastrous for Germany, arguably more so than for the oft-mentioned peripheral states of Southern Europe. An exit by Greece would be painful for the Greeks themselves – in many cases extremely so – but they would recover on the back of a weaker Drachma and the inevitable surge in tourism that it would bring. The danger would be that other countries that have struggled to appreciate what the single currency has done for them would see short term pain as a price worth paying and an unravelling akin to the Berlin Wall coming down could ensue. Our favourite image is of Germany being like “the spouse that doesn’t want to leave the dysfunctional family. As much as it complains, it craves the convenience of the union too much.”