The German government has had to bail out state-owned banks with taxpayers' money after their managements recklessly gambled away billions on sub-prime investments. But if a state-owned bank were to go under, the consequences could be disastrous for the whole economy.
In England, Northern Rock just got nationalized by the government.
The two situations are drastically different. The English can print more money and solve the problem. The German banking crisis is in a catch 22. They are in the European Common Market using Euro dollars and have no fiscal control over their currency.
What is becoming evident here is that Germany may break out of the European Union. Many of these member countries want and need to solve their economic problems in a way different from all of the rest. Nationalism is on the rise (doesn't that have a familiar pre WW II ring to it?).
If the German banking system collapses, the logical option would be a new national currency. Airbus can’t compete against Boeing. The appreciation of the Euro against the dollar is killing German industry. Unemployment problems similar to the 1930’s seem to be reappearing. Many have suggested that Germany’s joining the EU, was the second signing of the Treaty of Versailles.
The new Deutsch Mark could have an unsettling effect on world markets. The Euro in time could fade away. Let's face it; the Euro dollar is financial socialism without government representation. It's a little like the milkman delivery jokes. The fun was his, the kids are yours.
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