When I have looked from afar at the current Eurozone crisis, it is clear that the whole rescue / future prosperity on the continent rests with the ‘economic juggernaut’ Germany. Applying the ‘what’s in it for them’ principle, I naively assumed that this was because Germany would always have too much to lose from the breakdown of the currency union to allow it to collapse. Perhaps I was a little more naive than I thought.
Having recently studied trade partners, exports and imports (I’ve not been getting out too much), it appears that British exporters would probably be more damaged by a Eurozone implosion than German ones. Or to put that another way, businesses in the UK are more dependent on the health of the Eurozone than German companies.
Perhaps more importantly, German businesses are becoming less and less reliant on selling to Eurozone countries and are becoming more and more successful in selling to China and the leading emerging markets.
Two interesting conclusions from my time spent in a darkened room……
Firstly, it is clear that European policymakers need to get their act together. 2013 will see a German election and it will become increasingly obvious to the German voters that it is business with China that is making them richer and there is reducing incentive to show solidarity with Spain / Italy / Greece / Ireland / Portugal (et al). To use German wealth to underpin the recovery of weaker Eurozone economies is far from a vote winner.
Secondly, not only does the UK need to become less reliant on debt-fuelled consumer spending and become more of an investment-led exporting economy, it also needs to re-orientate its trade away from Eurozone economies limping along.
Who’d have thought the German election would become so important to the UK?
