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Germany made its choice

May 29, 2020

May 29, 2020

Euro didn’t burn bridgesDmitri Demidenko

Germany saves the euro

Figuring out which bridge to cross and which one to burn is the hardest thing in life. At the end of spring Berlin faced a difficult choice: does Germany need the euro and should it help out the Eurozone’s paupers? There has always been a risk of collapse in the Eurozone. Portugal, Ireland, Greece, Cyprus, Spain and Italy would get on fire from time to time, pretending to want to restore their national currencies. Still, the periphery’s indignation is one thing, while the centre’s indignation is another thing.

![LiteForex: Germany made its choice][1]

Weirdos become famous faster. German judges’ verdict on the illegality of the European Court’s rulings and demands that ECB should justify the appropriateness of its QE program made many of us clutch our heads. Germany pushed the EU to a constitutional crisis and limited the ECB’s powers, depriving it of the chance to save the currency bloc’s collapsing economy. In the market there are rumours that the country needs neither Eurozone nor euro. The German economy won’t slump as deep as other European economies in 2020: a long-term budget surplus allows Berlin to waste money lavishly. Also, money flows to safe havens during crisis times. To German bonds, for example. Germany will live through the pandemic easily. The question is, should it help its neighbours?

![LiteForex: Germany made its choice][2]

- We have to review our relationship.

- From which season?

The issue of the rich North and poor South has been always present in the EU. Even now, the Netherlands, Austria, Denmark and Sweden aren’t eager to provide grants to the most affected countries. It seems they know how to count money and money didn’t spoil them. When money doesn’t spoil a person, it leaves and goes spoiling another person.

![LiteForex: Germany made its choice][3]

Everyone has a future, but everyone is hungry in the present.  Italy and Spain had the biggest part of the pie - almost 313 billion euro, but it’s Germany that will pay the bill. The Germans seem to be correcting the false step taken by the judges in Karlsruhe: Angela Merkel initiates a large fiscal stimulus and Bundesbank publishes a study confirming that QE delivers more benefits than side effects.  They say, the QE program increased crediting, employment and inflation rates. I even can’t believe it. Is it the Bundesbank whose representatives belong to the Executive Board’s hawks and often voted against softening the monetary policy?  Is it the Bundesbank whose head Jens Weidmann once sued for QE?

Germany took its decision. It won’t burn bridges. It might be a mistake, though. Well, a mistake means an attempt, at least.

The main beneficiary of the EU’s generosity and unity was the euro. All the rats had left its ship by the end of spring. It turns out they were rushing to a carnival. The final decision on a fiscal stimulus will be taken at the EU’s summit in the second half of June. So, there’s not enough information for buying [EUR/USD][4], but the lack of information may cause a slight euphoria while an excess of information - a severe depression.

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Price chart of EURUSD in real time mode

![Euro didn’t burn bridges][7]

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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