Merkel Pushes for Expulsion Option

Angela Merkel proposed Wednesday to Germany’s lower parliament,that countries threatening EuroZone financial stability should face expulsion. She also warned against pouring money into Greece when it was unclear if a bailout would even be the necessary fix that Greece needs. Merkel’s comments rival a December paper documenting that kicking a country out of the EU would be next to impossible. The expulsion mechanism would require a treaty change and all 27 members would have to agree. Getting those signatures, especially now, will not happen. It would be as if Greece were signing it’s own dismissal. The threat from Merkel is inherently empty.

Germany seems quite unhappy in the Eurozone, but the reality is that Germany needs the weaker Southern European countries to export its products to. It will have to either bite the bullet or handle its economy differently. Demanding budget cuts from Greece is their constant refrain, but it does not appear that Greece will be able to meet all those requests. Greece will probably have to reschedule debt payments, and Germany and the rest will have to subsidize them.

The other option could be, and one that some economists are predicting, is that Greece will step out of the EU to devalue its currency, resurrecting the drachma. Paying back its debt in Euros is going to be a serious challenge causing even lower wages and further tax increases.