NEW YORK (TheStreet) -- It's comforting to know that, in this uncertain market, there are two certainties one can count on: bank scandals and euro crisis.
Barely two weeks have passed since the euro crisis conceded the spotlight, yet Spain (10-year Spanish sovereign yield passed 7.5% as of early Monday morning -- new records are expected by the time this gets published) and Greece (open official talk of no bailout payments and Grexit,
) are back again.
In retrospect, I have persistently underestimated the resolve of the people in peripheral eurozone to stay in since I started calling for euro dissolution in 2010. The Greek people in particular have suffered a great deal for a long time even though, from the purely economic perspective, it's clearly better for them to leave, devalue and default. They've had multiple chances to do so via numerous elections and referendums; yet they clearly chose to pay the heavy price for staying in every time.
Spain has shown similar resolve. Sure, there are a few protests here and there; but so far the overall balance is clearly tilted toward staying.
This forced me to broaden my thinking beyond economics. The euro experiment is apparently not just something dreamed up by the elites, as some cynical commentators would say; rather it has some deep popular support. In other words, the euro crisis is not just a political issue, but one that's rooted in the streets.
This realization gradually changed my outlook on the euro crisis over the past few months. If the people in peripheral eurozone are determined to stay, there's no way others can force them out.
Sure, Greek debt may default; but it's been in default for a long time in every way except for some technicality.
At this point, Greek default would be mostly a nonevent, and separate from the euro issue. Suppose the post-default Greece shows no sign of wanting to leave, what then?
As throughout the history of the European continent since the fall of the Frankish Empire, it always comes down to the two giants, France and Germany (or variations thereof). The euro was mostly a French idea to begin with; Germany was at best a suspicious partner who wanted to reunite with East Germany for any price.
The French calculation is that they would surely be the dominant force in the United States of Europa due to the country's relative overall independence from otherwise complete U.S. domination.
Germany, on the other hand, has decades of work ahead of them recovering moral equity (and real sovereignty) lost in World War II. Economy alone never makes an empire. I know, empire building is barbaric; how about power and interest then, is that also passé?
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 (
), 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.