It has only been a month since German Chancellor Angela Merkel suggested that the Eurozone needed a way to eject companies from the alliance if they persistently broke its financial rules. Greece was at the top of here target list as its deficit moved to 13% of GDP. Greece has had trouble raising money over the last several days which means that its Eurozone brethren and the IMF will need to give financial support which could reach 30 billion euros or even more.

Greece’s cause will not be helped by the revelation that corruption and bribes are about 8% of GDP, or  close to 20 billion euros. The estimate is by The Brookings Institution. The analysis from the think tank was reported in The Wall Street Journal.

The question that none of the Eurozone nations want to ask in public is whether Germany would consider quitting the alliance completely. It is by far the largest country in the group based on GDP with annual exports second only to China. From an economic standpoint, it does not need its membership in the Eurozone at all. And, there is tremendous pressure on Merkel from her own countrymen to walk away from the Greek debt problem which may become a Spanish and Italian debt problem

If Germany does leave the alliance, the impact may be more on those left than on Germany itself. Capital markets are likely to view many of the nations that are left as risky bets. The will almost certainly raise their cost of borrowing. Like Greece, Spain, Italy, and perhaps Portugal, would end up paying such high interest rates to bring in money that the service on that debt alone could ruin them.

Germany does not want to be seen as the destroyer of the economic future of Eurozone nations, but at some point it may decide that it does not want its money to be at the core of the loans extended to weaker nations. Germany’s own sovereign debt would certainly be viewed as less risky if it was not the “bank” for the rest of the region.

At the end of the day, despite the extreme difficulty of unwinding the euro, Germany’s financial system and the weight of public opinion may push it out the door.

Douglas A. McIntyre