The cause célèbre these days is the potential reconstitution of the eurozone: ie, Germany leaving it, or Greece getting kicked out. To look a little deeper, today I'm sending you STRATFOR's take on these two scenarios. STRATFOR explores the geography of the continent and the historical context of the EU to understand what a German exit or a Greek expulsion might mean for the rest of the region. After you read the article, sign up here to receive more STRATFOR global intelligence reports like this one.
John Mauldin, Editor, Outside the Box
Germany, Greece and Exiting the Eurozone
By Marko Papic, Robert Reinfrank and Peter Zeihan
Rumors of the imminent collapse of the eurozone continue to swirl despite the Europeans' best efforts to hold the currency union together. Some accounts in the financial world have even suggested that Germany's frustration with the crisis could cause Berlin to quit the eurozone - as soon as this past weekend, according to some - while at the most recent gathering of European leaders French President Nicolas Sarkozy apparently threatened to bolt the bloc if Berlin did not help Greece. Meanwhile, many in Germany - including Chancellor Angela Merkel herself at one point - have called for the creation of a mechanism by which Greece - or the eurozone's other over-indebted, uncompetitive economies - could be kicked out of the eurozone in the future should they not mend their "irresponsible" spending habits.
Rumors, hints, threats, suggestions and information "from well-placed sources" all seem to point to the hot topic in Europe at the moment, namely, the reconstitution of the eurozone whether by a German exit or a Greek expulsion. We turn to this topic with the question of whether such an option even exists.
The Geography of the European Monetary Union
As we consider the future of the euro, it is important to remember that the economic underpinnings of paper money are not nearly as important as the political underpinnings. Paper currencies in use throughout the world today hold no value without the underlying political decision to make them the legal tender of commercial activity. This means a government must be willing and capable enough to enforce the currency as a legal form of debt settlement, and refusal to accept paper currency is, within limitations, punishable by law.
The trouble with the euro is that it attempts to overlay a…
