So the euro issue ultimately comes to this: It is to the benefit of France and the peripheral to keep it together no matter what, and Germany is the first and foremost in bearing the cost.
Unlike the peripheral, however, German people feel much weaker emotional ties to the grandiose euro sign I suspect. The single currency has been beneficial to Germany exports, yet the downside of this has been increasingly clear to the German people: potentially huge loss through Target2 imbalance (
read about this on Gavin Davis Financial Times blog
), the risk of German credit rating and bunds being dragged down, almost unified opposition to their insistence of austerity (thus threat of inflation), and last but perhaps the most, increasingly being perceived once again as the villain.
If there is ever to be a eurozone banking supervisory entity, euro bonds, a fiscal union, or political union, Germany's duty will always be to pay but not to wield power. This is not about nationalism, at least not in the first-order analysis. It's simply the economic and sociopolitical reality.
As the crisis deepens, the pressure as well as negative impact on Germany will only increase. Consequently, the German people will feel more and more pain and frustration. At some point they will begin asking: Is it still to our best interest, either in the short term or longer term? And the logical answer has been staring at them all this time: go back to Deutsche Mark.
And nobody can stop them from leaving, just as nobody can stop the peripherals from staying.
That said, I'm not predicting the imminent resurrection the mighty DEM. Although I've been bearish on the euro since 2010 and my longs in the
have done well, I've also learned that this can be a long, drown-out process that can be bumpy and painful along the way, not to mention capital inefficient.
A smarter way seems to be making shorter-term risk-off bets and taking profit often.
At the time of publication, the author was long UUP and U.S. Treasury bonds.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.