I hate to be one of those “I told you so” people but sometimes you just have to be. Last year in September I told you about the German D-Mark being revived in that country because it was never de-monetized and how it looked like some merchants and some people were getting fed up with the Euro ( Here). Well what started as a local movement to really just start circulating a dying currency is now poised to replace another dying currency and it could have dire effects for Angela Merkel.
A new political party based on killing the Euro the AfD (alternative for Germany party) proposes withdrawal from the Euro and a return to a strong D-Mark or a breakaway currency with the Dutch, Austrians, Finns, and other Germanic countries. Interesting seeing as how the Dutch also opted out of de-monetizing their currency when they implemented the euro leaving them all a pretty little out in case of emergency.
Now, this party has to be taken seriously as the problems with the poor countries in the EU continue to drag down strong economies. Chancellor Merkel is facing re-election this September so getting too deeply into any more buyouts or currency rescues could be problematic for her and her party, and how do Germans feel about the EU and the Euro. Polls show 65% of Germans believe the Euro to be damaging and 49% say they would be better out of the EU.
Again, the AfD is a protest party, but with hardline currency reform they could take a number of votes out of conservative parties and into themselves causing the breakup of several coalitions in German politics. Merkel will have to get tougher on countries like Spain, Italy, Greece, Cyprus, and pretty much anyone else who wants to welch on their debts and get a buy off.
In the end as Germany goes, so goes the Euro. If they leave and return to the D-mark only the poorest of countries will stay with the Euro. Spain would have no reason, nor Italy as returning to their own currencies would actually strengthen their relative buying power overnight at least in the very short-term. But even short-term gains look good when you are facing a financial crisis, and Germany already the strongest player in the Euro would come out far ahead despite the shrinking of assets based in the Euro.
The really good thing about this whole thing is if they do manage some reform and the Germans do pull out of the Euro it would serve to strengthen the dollar on the world market.