Auf wiedersehen wirtshaftswunder?

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The Germans are having a tough old time of it lately.

For months a coterie of southern European basket-cases have been pushing hard for them to sign on the dotted line re euro-bonds read Germans bailing out everyone else by standing behind their debts.

Then, in the weekend, German footy has taken a faecal turn with disgraceful behaviour at the Cologne v Schalke match.

And this week we have the news that the German economy only expanded by 0.2% in the second quarter.

So is it the end of the wirtshaftswunder (economic miracle)?

One cloud is well and truly within the gambit of the politicians to address – and I don't mean the football.

That is the eurozone debacle that has lurched from train-wreck to train-wreck since the (first) decision to bail out Greece last year.

Were this to be resolved, it's possible that Germany's fortunes and those of the eurozone more generally could turn up. And there's no doubt this is the schwerpunkt for Chancellor Merkel at the moment.

Sadly Ms Merkel's summit with French President Nicolas Sarkozy this week, seemingly did not deliver.

Markets have been tripping over themselves to punish the heads of Europe's two largest economies for failing to countenance eurobonds.

Yet you can understand Germany's reluctance to get their hands dirty with southern European debt.

Speculation about the possibility of one or more eurozone members leaving the single currency has helped keep the euro low and therefore helped German exporters.

While a stronger Europe is certainly in Germany's long term interests, at least in 2010 and the first quarter of this year, export growth in Germany powered impressive growth.

A more important factor is the impact Eurobonds could have on Germany's cost of borrowing – it would increase. Again hardly a welcome development for the German economy and one the populace would feel is ill-deserved given Germany's relative control over its finances.

A third factor has to be the bargaining aspect. As soon as Germany agrees to stand behind eurobonds the pressure comes off the peripheral European countries to reform rigidities holding back their economies.

Perhaps that's why Germany is trying to drive reform in the direction it favours first before contemplating any Eurobond arrangement, starting with the announced intention this week for France and Germany to harmonize corporate tax rates.

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