The Germany/ ECB Relationship is Approaching its Breaking Point… Right As Spain Starts imploding
by Phoenix Capital Research
As I’ve noted in previous articles, there is a growing tension between the ECB, the central bank backstop for Europe, and Germany, the de facto sovereign EU backstop.
In brief, the ECB has wanted to monetize and bailout needy EU members aggressively while the inflation-phobic Germany has wanted to impose fiscal constraints as well as austerity measures (essentially fiscal sovereignty) on needy EU members in exchange for bailout funds.
The reason for this difference in attitudes is political in nature: Germany has already experienced the consequence of rampant monetization (Weimar). Moreover, Germany, sees this as an opportunity to further extend its reach and political clout in Europe. So it’s used every chance it can to advance a German-lead “political union” (German Finance Minister Wolfgang Schauble’s own choice of words).
In light of this, Germany has been willing to stomach the ECB’s moves because it does not want:
To be seen as the cause of a Euro breakup
To kick off a banking collapse via #1