Really the euro is supposed to be the German deutsche mark. Investors have treated it that way. That’s why it’s worth so much. It’s like the British pound sterling. That’s why the rest of Europe has to conform to German currency standards to maintain the currency union. Otherwise, it won’t work.
European investors flooded into German bunds on Monday as reaction to Greece’s coming default. European banks cut back lending to Greece despite the announcement over the weekend of a new property tax in Greece to be collected with electric bills. Investors didn’t need to look further than Greek tax collectors and customs officials going on strike on Monday to lose confidence in the new tax.
German bunds hit new lows, 1.72% for 10 year bonds. It will only get worse as Greece gets closer to default.