Greece Exit Possible, Euro Dives—Germany and Merkel Unfazed

The value of the euro reached its lowest point in nine years on Monday when more uncertainty about Greece’s status in the euro bloc emerged. Some analysts fear Greece will leave the Eurozone altogether, but Berlin is unmoved by the prospect.

Greece submitted to severe budget cuts beginning in 2010 in order to receive more than €100 billion in bailout funds from the Eurozone, the European Central Bank and the International Monetary Fund. But now analysts question whether it will follow through with the cuts. Greece’s anti-austerity party, Syriza, is showing strong poll numbers ahead of the country’s coming national elections.

With Greeks reacting so strongly against austerity cuts, it’s possible that Greece will choose to or be pressured to leave the Eurozone, a supposedly worst-case scenario many are calling “the Grexit.”

But fears of a Grexit have been ongoing since the euro crisis began in 2008. So what changed?

According to a Der Spiegel report from January 5 unnamed officials have said that German Chancellor Angela Merkel no longer thinks a Grexit would be too risky for the 19 member Eurozone.

However, Sitka Pacific economic analyst Michael Shedlock says, Merkel is probably bluffing. Were Greece to leave the euro and default on its bailout debt, the German government would be on the hook for approximately 66 billion euros. German banks, which were the biggest lenders to the Greeks, will lose out, as will many of Germany’s large international corporations.

However, a Greek exit would benefit Germany in some ways.

Joerg Kraemer, chief economist at Commerzbank AG, said the German economy could actually experience “positive effects” if the euro’s value continued to fall.

A lower euro valuation makes European exports less expensive for foreigners to buy—allowing European manufacturers to sell more products around the world.

And the European country that is by far the largest manufacturer and exporter is Germany.

After Merkel’s alleged comment became public, Berlin has said it has made no changes in policy and that Germany expects Greece to fulfill its obligations to the 28-member European Union.

Much of the reporting about the possible Grexit revolves around its economic effects. But the Trumpet notes that the most significant factor is not the billions of euros saved or lost, but the effect of the financial crisis on politics. The faltering Eurozone could lead to a radical change in the political landscape of Europe.

The Bible prophesies that a European superpower will rise during this generation. That European federation will consist of 10 nations, led by Germany, and it will become much more than just an economic powerhouse. For more information on how a financial crisis can reshape the EU into this prophesied superpower, watch Stephen Flurry’s Trumpet Daily video “The Ten-Nation Euro Beast.”