Goldman Sachs’s opinion is just one voice, but it joins a number of others. The IMF and OECD have expressed deep concerns about EU growth. All of these warnings were nothing more than educated guesses. Now it appears that they were very good judgments.
Germany is the linchpin of any bailout of a Greece or other countries in the region. That is old news. The forecast of a recession in the largest nation in the region is not. The tide of the world economy has turned against Germany, and that has only happened in the past month or two. Germany’s manufacturing and technology driven businesses are fueled by exports to the U.S. and China. The U.S. economy may have reached it own tipping point. And there are signs that the 9% growth of China’s GDP is threatened by export problems of its own. China’s expansion is supposed to be “decoupled” from the rest of the world. It turns out that this is almost certainly a myth. Germany needed that myth to be true.
Greece’s recession may well not be what causes a default that quickly spreads to other countries. Germany’s lack of an ability to commit funds may be the trigger instead.
Douglas A. McIntyre
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