When will the euro split asunder? When Germans feel it in their pockets

The Telegraph ^ | 3/16/2012 | Jeremy Warner

[bruinbirdman]

Wait until German shoppers feel the eurozone crisis in their pockets

Faced with execution today or execution tomorrow, most people would choose the latter option. Who knows what might happen in between – an amnesty might be declared, the executioner might die. Hope springs eternal.

This way of thinking has come to instruct European attitudes to the euro. Everyone now accepts that the euro hasn't worked out as hoped, but they would rather have it all breakup at some point in the future than face the immediate pain of having it breakup now. It seems unlikely, but you never know, in the meantime things might sort themselves out.

Thus it is that eurozone members, stumbling from one crisis to the next, continue with a project which everyone now essentially knows to be unsustainable. So what's ultimately going to bring matters to a head, and when might that point come?

I've been discussing this question with the German economist Hans-Werner Sinn, head of Munich's respected Ifo Institute. His best guest? It's the point at which Germans start to feel the eurozone crisis in their pockets, or in other words when they want to draw down their savings and find that their debtors cannot pay. In aggregate terms, this happens ten to fifteen years out when the demographic timebomb fully kicks in and the savings are needed to finance higher spending on the unproductive elderly. If it hasn't occurred before then, that's the moment at which Germans will say enough is enough.

But surely the Germans must have realised by now that their money isn't safe, so why haven't they already called time appropriately? We've just had write-downs on Greek sovereign debt of more than €100bn, and we can be pretty certain there's a lot more of