Forget Greece, Germany is the real big issue now

The IMF has confirmed that the $1.2 billion repayment due by Greece to the IMF on June 30, 2015 has not been received. Reminding that Greece is now in arrears and can only receive IMF financing once the arrears are cleared, IMF Communications Chief, Gerry Price, said Greek authorities asked for an extension of Greece’s repayment obligation. Many analysts, bankers and politicians have tried to get away from facts by digging up implausible arguments with a view to convincing the public opinion that in spite of such a clear default on behalf of Greece, this is not a default for real. Greece has been unable to reimburse not for political reasons but mainly because there is no longer money in the public vaults. If this is not a default, what is it then?

Even if there was shortly some surprise and unexpected international aid for Greece, the definitive default would be delayed at best since Greece’s macro-economic conditions have not been forecast to improve in the coming months – at least sufficiently, quite the contrary. This is exactly because the medium term and long term forecasts are bad that Greece may not be the biggest issue for Europe now. European governments’ attention should focus on Germany whom both people and officials will likely lose patience in front of the endless difficulties of the euro area.

As the latest sovereign country of Europe, i.e. spying on its “closest European partner” France for the US, Germany would likely serve its national interests first if it realizes it cannot drive Europe the way it wants. Summing up, if the euro is not any longer the worthy successor of the Deutsche Mark, Germany may be tempted to take unexpected decisions which could end the European Union (EU) as it exists today, and sooner than you could imagine. The question here is not to tell if Germany would be right or wrong by acting this way, because there would be good and bad reasons to do so. The question is to be ready to deal with everything.