Euro-zone has made a new step towards disintegration, once Germany decided to step back from another principle of stability of the euro. It is clear that step by step the euro becomes a piece of paper, and Germany will apparently return to the Deutsche Mark. This is the only way - the euro devalued will stay as currency for lazy nations. For Germans and other solid and industrious countries - a Deutsche Mark and some clones of it. Later, the lazy nations will understand they are losing their standard, and they need Marks and not Euros. But with no common currency they will have fewer reasons to ask to be saved...
Do you know what last night the Euro-leaders decided in attempt to fight the crisis?
They decided 2 things:
First, the rescue loans will be available without special requirements for reforms.
And second, the European rescue fund (EFSF, EFSM) will provide loans directly to the troubled banks without these loans being guaranteed by the government. I.e. The European rescue fund will actually nationalize the troubled banks' losses...
Now the question remains are you willing to invest in the bailout fund? It will not enjoy the status of a privileged creditor, in fact it will be a private lender, to private entities, even without the ephemeral guarantee of a bankrupted government like the one of Italy or Spain.
The fund has now 500 billion Euros, already collected with quite different promises to the donors. So I ask, have the donors now right to step back and withdraw their money? If not, will they have the desire to give more, because most of these 500 billion Euros are already spent in saving Greece, Portugal, Ireland and Spain (banks).
I would remind something that is written in textbooks in economics - when you create a system that is super beneficial to the debtors, and extremely unattractive to the creditors, then all market players go into debt and nobody wants to give loans. Finally, the system collapses ... At least that is written in books, and this is the current historically proven result. Perhaps the EU has discovered a new history ... :)
June 29th 2012