Will Germany Save The EU?

Europe has long tried to build leverage through a common financial platform. Alas, the resulting European Union has done nothing to solve the differences between the countries. As the EU heads towards a break up, we could all suffer.

Most observers think the Euro Zone is a modern idea. Actually, it came about after the defeat of Hitler and Nazi Germany as people tried to figure out how to prevent a third war. By tying the countries together economically, many thought this would be achieved.

The European Union may have seemed like a pretty good idea at the time. Well, it was. Unfortunately, the actual agreement fell far short of what needed to be done. Governments were only partially connected, which we are seeing now as a fatal flaw.

To see this problem in action, consider Italy and Germany. Italy is beyond corrupt, runs huge deficits and is a complete fiscal disaster. Germany pursues conservative economic philosophies and keeps its debt low in contrast.

We can observe how this is now ripping apart the EU. Italy needs funding for cash flow and its debts. The only country that has the money to contribute to it is Germany. This means Germany is punished for living within its means which angers its people.

The simple fact is it is hard to see how the European Union can survive this pending disaster. Why? There are too many parties involved and way too many different interests to get this hammered out.

To understand the problem, look back a few years across the pond. The U.S. passed TARP to save itself and that was nearly impossible to do. That was just one Congress. On top of that, we now know Ben Bernanke had to pump 7 trillion dollars into the economy.

Now consider the situation in Europe. Instead of one Congress, you have to get the legislative bodies of 25 different countries to agree to a plan. The chances of that happening are next to none if you are being realistic.

The real question now is how will the European Union break apart and what will it mean for the world? The top export market for the United States is Europe. When the EU dissolved, demand will drop like mad as well and the U.S. economy will stall.

Then there are the banks. The banks of the United States and Europe are intertwined. Many worry that failed banks in Europe would bring down the banks in the United States as well. If that happened, we could be looking at a world wide depression. That should keep you up at night.

The bond holder threat that has Spain by the short hairs is also a threat to America. When bond holders discover the United States is not disclosing 6.4 trillion in additional debt, they could do the same thing.. Free reprint available from: Will Germany Save The EU?.