This Chart Is The Holy Grail For Understanding Europe...

The fact of the matter is that ONLY Germany has seen its trade balance improve since the introduction of the euro. France and Italy have gone from countries running trade surpluses to countries running trade deficits.

And so it is we turn to this chart produced by Reuters' graphics guru Scotty Barber comparing car registrations in Greece vs. the spread between Greek and German bonds.

Actually, the car sales line is inverse... so that you get the logical conclusion that as interest rates go up, car sales go down.

Observe:

Image: Reuters

The simple (and correct) story is that the introducing of the euro made borrowing super-cheap, and that fueled a car consumption bonanza in Greece. And, well, you probably don't have to be a rocket scientist to guess which country made all the cars that the Greeks snapped up like crazy (spoiler alert: Germany).

So if Greece is ever going to work, there needs to be a system that resolves this problem, whereby Greece (and the rest of the PIIGS) are basically big credit-fueled consumers of goods from Germany. One solution, obviously, is fiscal union (having the Germans continually transfer money to the periphery), but the politics of that are going to be really tough. Another solution is for the Greeks to become ultra-productive makers of fine manufactured goods (like the Germans are) but we don't see that happening soon.

Regardless, merely fixing the current "debt problem" doesn't get at the underlying problem.

via www.businessinsider.com