Forex Flash: For EMU to survive, it will take a German shape - BBH

FXstreet.com (Barcelona) - Marc Chandler, Global Head of Currency Strategy at Brown Brothers Harriman notes that in order for the EMU to survive, it will be shaped by the most powerful interest, which is Germany.

He comments that as the US pivots towards Asia and the UK threatens to leave the EU, the centuries old balance of power politics is giving way to a German led block. He writes, “Its ideology of ordo-liberalism advocates a strong state and strong markets, as opposed to the Anglo-American neo-liberalism, which allows for a smaller role for the state.” Chandler feels that there is a sense in some of the local press that Germany is tired of aid and it is not coincidental that the Bundesbank just made public a report that has been available to several weeks showing that, due to home ownership rates, many European, include Spaniards on average, are richer than Germans.

He continues to note that of course, political sensibilities are running high as the national election draws nearer (in September), and the first German party to officially advocate leaving EMU, has been launched. He adds, “At the same time, the cost to Germany has thus far been quite limited and what de minimis funds it has had to raise has been more than offset by the lowering government's lowering borrowing costs and interest on its loans.”