Jean Claude Trichet signaled what was really going on in the EU when he announced that the interest rates were being raised to 1.5% from 1.25%, the second rate increase this year. This is not political and it’s not showmanship like the continuing show called the Greek bond crisis. It’s the meat and potatoes of the European economy — Germany.
Germany needs an interest rate rise because it’s growing and the Germans fear inflation more than anything else after the hyper-inflation of the 1920’s. Trichet even signaled that there will be another increase this fall, again because of Germany.
The German mark is in essence the euro. Germany decided to expand and share it with the rest of Europe. Greece and the pigs want to participated because it raises their level of prosperity, especially in good times. But in bad times it stresses the Greeks, the Portuguese, and the Spanish along with the Irish. But they have to stick with it and hope that they will prosper like the Germans.