Post Title.Germany Runs Into Roadblock In Pursuit of “Economic Lebensraum”

Could this be the beginning of the meltdown of Germany’s great postwar experiment, the euro, as the universal European currency to give Germany economic muscle more heft? On Friday the euro sank to $1.4157 against the dollar, down from $1.4311 on Thursday, because of the threat of rescheduling the Greek bonds and the uncertainty about what will be learned about the Spanish debt after the election.

Spain, unlike Greece, is Europe’s fourth largest economy after Germany, France, and Italy. It’s too big to bail out. That’s why Germans have been using the word “reprofiling” instead of “rescheduling” the Greek bonds.

This is all happening rather suddenly. In early May higher Euro Zone interest rates led to a value of almost $1.50 euros to the dollar. The euro is down almost 5% since the beginning of May. To make matters worse Fitch Ratings on Friday downgraded Greece’s credit by 3 points. Standard and Poors has already done so.

Everybody sees the widening of yield differentials between Spanish and German benchmark debt with Germany used as the standard for the Euro Zone. Will Europe be able to survive this company of unequals? Or will it again break up into its old individual currencies? And if it does so, will the ill will and conflicts bring skeletons out of the closet? Will they spark more violent clashes over unresolved issues such as the border between Poland and Germany — the former East Prussia — which is now a sort of No Man’s Land? What about northern Italy, once part of Austria, and given to the Italians in one of World War I’s most notorious dirty deals?