The European rescue plan that dare not speak its name
Should Germany leave the euro? Looking at the eurozone debt crisis unfold, many economists are warming to the idea, though I am told that the German chancellor emerged from this weekend's bail-out talks more determined than ever that the single currency remain intact.
Her plan, I'm told, is to honour the promise to proect senior creditors "in the breach". The current rules and protections will stand until 2013, but if there are individual bank failures before that time, she is going to try very hard to force private senior creditors to take a hit.
As one person put it: "the more this is about banks, the cheaper it is for Germany." It will be interesting to see whether this German offensive on debt is any more successful than the last one.
In the meantime, what about the rest of the eurozone? Could it benefit from getting rid of Germany, and maybe some of its neighbours?
As it happens, the European Commission provided some inadvertent support for the "dump Germany" idea in its latest European economic forecast. It predicts the euro area will grow by 1.7% this year and just 1.5% next year. But that average hides a lot of sins.
It sees growth for Germany of 3.7% this year and 2.2% in 2011, but in Spain the economy will have shrunk for a second year in 2010, and growth in 2011 is forecast to be a measly 0.7%.
Italy is the only country on the porcine periphery that is expected to grow by more than 0.5%, on a cumulative basis, over the course of 2010 and 2011. (And it's worth noting that the Commission doesn't think much of Ireland's forecast for growth of 1.75% in 2011. The European forecast is 0.9%.)
Today's employment numbers are the icing on the cake. The eurozone unemployment data out today shows German hiring intentions higher than they have been at any time since unification.
There's an undeniable buzz in Germany these days - you hear about it from every German you speak to. The official line is that some of that buzz is at last coming from the domestic market. Supposedly, the long-awaited re-balancing of German growth is at hand.
Well, maybe. Yesterday's forecast has German domestic demand growing by 2.3% in 2011, compared to a eurozone average of just 1%. But remember that a good part of that demand will be dedicated to serving German exporters. Private consumption is expected to grow at less than half that rate: not much faster than the Eurozone average.
German exports grew by nearly 15% in 2010, and investment in equipment and machinery is set to grow by roughly 10% in 2010 and 2011 - twice as fast as the Eurozone average.
Leaving the euro would test the proposition - often advanced by German officials at international meetings (see my posts from Seoul) - that Germany's trade surplus has nothing to do with having the same currency as Greece, Italy and Spain.
You never know, they might be right. Germany specialises in capital good exports, which are traditionally driven by external demand more than price.
We can say for sure that if Germany left the euro, the new German currency would go up, and the euro would probably go down. It's a fair bet that other big surplus countries, like the Netherlands, Austria and maybe Finland, would want to join them.
The huge advantage, to the periphery, would be that they would get a depreciation (albeit possibly a modest one), without having immediately to default or restructure their debt. If they left the euro themselves, their euro-denominated debt would soar in value, meaning some form of default was more or less guaranteed.
Of course, if the periphery is going to come out ahead, there would have to be losses for German creditors, notably banks, who could see the value of their euro debt fall sharply in domestic terms.
In a sense, that's what a currency appreciation is all about: long-term, it's supposed to make it less attractive to invest and export abroad, and more attractive for businesses and banks to focus on the markets at home. It's called re-balancing the economy. But the short-term hit to German lenders is yet another reason why Germany will not be abandoning the single currency any time soon. It doesn't want anyone else to leave either.
However, if the Euro continues in its current form, the chances are there will be need to be either a series of bail-outs, or a much expanded system of fiscal transfers between states, as the countries on the periphery discover that they can't make life in a single currency pay.
Knowing that it would have to bankroll both of these, Germany would rather have neither. That is why it is so keen to have private creditors pay for them instead. But remember that many of those creditors are German. In a twin-track eurozone, the big creditor nation ultimately has to choose between propping up the debtors, or losing a big chunk of the money that it has lent.
That sounds rather like a choice between Germany paying for the single currency crisis upfront - with a costly exit right now - or paying for it in installments, in perpetuity.
German voters won't be offered this choice, in so many words, by any senior German politician in the current group. But who knows what they would choose if they ever were?