The fall in the euro is not completely accidental. Indeed, many in the Eurozone see the decline as an opportunity instead of a sign of weakness. Nevertheless, it is not clear to me that the Greeks or the Spaniards will gain from the decline as a considerable deal of their trade is done within the Eurozone.
Greece has developed an export market in Eastern Europe, with Greek banks being active in the Balkans. But, its largest trading partners are Italy and Germany. Spain’s problems here are even larger as Spain’s four largest export markets comprise 45.6% of the total and all of the countries are within the Eurozone.
If anything, the Germans are going to be the winners from a competitive currency devaluation. They are the exporters par excellence within the Eurozone. And the Germans export far and wide.
An article in today’s Irish Independent makes the case for a weak euro being Germany’s boon, pointing to specific companies that could benefit.
Germany stands to benefit from the decline because of its status as the world’s second-largest exporter, Ms Olney wrote recently. The euro’s retreat makes the country’s products cheaper for overseas customers and increases the value of international sales.
Any effort by the European Central Bank to hold down interest rates in response to the crisis may lead to faster German economic expansion, she added.
Ms Olney singled out nine German companies that generate more than 25pc of sales outside Europe: insurer Allianz; post office operator Deutsche Post; energy company E.On; health service provider Fresenius; medical supplies company Fresenius Medical Care; engineering and gas company Linde; drugmaker Merck; software company SAP and engineering company Siemens.
Ms Olney said: "When and if the dust settles, we remind investors that we are still in a recovery, however muted it might be."
Of the four most battered Eurozone economies, Ireland is the one most likely to benefit from a weak euro, its exports already having increased by double digit figures in the first quarter. But the fact that Germany will make out the most if the euro falls precipitously demonstrates that there really are very limited options for the likes of Greece. With the country bound to the Euro, there really is no way for it to reduce its debt burdens permanently except via internal devaluation and default.
The shock and awe drama was really just a temporary solution. Despite the short sale bans in Germany, even German Chancellor Merkel has now admitted as much. For the time being, European leaders are still groping for a solution, trying to figure out when and how they should break the news to the markets that Greece won’t make it. But the longer they stall, the greater likelihood of contagion.