The following hypothesis is mainly based on geopolitical and political considerations, and has not been validated by monetary policy experts. Yet the current and future circumstances make it increasingly credible. The endless cat and mouse game between Greece and the Troika – the ECB, the IMF and the European Commission (EC) – becomes very frustrating for the Greeks, for all the Europeans, for the financial markets. It has been even more frustrating for Germany which has faced growing opposition to its austerity posture in recent days. A rumor that announced an extension of the Greek non-IMF bailout till the end of this year (2015) was promptly denied, but it showed Germany had to discuss solutions it has always categorically rejected. The more the crisis lasts, the more Germany can be tempted to leave the euro area, independently and suddenly. While you imagined the exit of Greece – the “Grexit” – as the worst possible option for Europe, the surprising scenario of an exit of Germany – the “Gerxit” – could be brewing behind the scenes. A contradiction lies at the heart of the euro area.
If the euro has meant the selling-off of monetary sovereignty, Germany – like the USA, the UK and Switzerland for instance – has never lost, in a sense, its own monetary sovereignty. Since the euro has been established, Germany has become the undisputed leader of a low economic growth Europe and the preferred interlocutor of other great powers and international organizations for everything about finance and economics in continental Europe. Without neglecting the sound discipline and the real budgetary responsibility Germany has followed for decades contrary to most of its European partners, it has kept the attributes of sovereignty while being the main engine of the European Union (EU). Germany has been using a same currency with 18 other countries, but Germany has politically behaved a bit like the US Federal Reserve (Fed) behaves with its offshoots across the US. Because the euro has been somehow the successor of the Deutsche Mark, Germany could envisage its unannounced exit from the euro area were the financial and political conditions to worsen in her view, like the definitive inability to reach an agreement with Greece or the victory of Syriza-like political parties in Spain, Italy or France.
The exit could be almost immediate as all “X” marked euro bank notes would instantly become the new temporary Deutsche Mark as Germany designs and prints new bank notes. Furthermore, as the main ally of the US in Europe – the recent allegations of the BND spying on French officials for the NSA has shown the extent of the two countries’ alliance to the detriment of its main European partner – Germany would not have to fear strong transatlantic speculation with a view to weakening its born again Deutsche Mark. Strong with US support and real monetary credibility, Germany may currently be the sole euro area member-country able to leave almost overnight without risking long-term systemic turbulences. While you stared at the Grexit, the Gerxit could be the stunning blow you never saw coming. Germany’s patience has limits too. At such a current level of tensions, you never know. The Grexit may not be the sole option on the table.