Felix Zulauf interview part 4: Weaker Germany would be a disaster for all of EU

The financial market expert Felix Zulauf expressed his opinion in a recent interview for Wirtschaftswoche Online that a much weaker Germany would be a disaster for all of Europe as the continent fall in global competition and significantly reduces the general welfare.

Can the imbalances in the euro zone be eliminated by more inflation in Germany?

Theoretically, this would be feasible. If Germany raises unit labor costs by 20 percent to 30 percent, that will lead to a massive increase in wages, the other countries will become more competitive and could hope for more exports to Germany. But the debt problem will not be resolved. That will happen if German wage-earners, who has so far maintained a degree of frugality consume, suddenly go wild. But that does not comply with the German mentality. Germany should not go that route.

But Europe sees it differently...

Normally, each person is oriented to the major service providers and trying to emulate the successful ones. The fact that Germany is now based to the back in the rankings, is an example of wrong thinking. A much weaker Germany would be a disaster for all of Europe as the continent fall in global competition and significantly reduces the general welfare.

Felix Zulauf interview part 3: All the major cornerstones of the Basic Agreement on the European Monetary Union have been broken

The financial market expert Felix Zulauf expressed his opinion in an interview for Wirtschaftswoche Online that the only chance Greece to be back on its feet is leaving the European Union ant to abandon Euro currency. Zulauf added that after one year of chaos, Greece will stabilize through its agriculture and tourism.

What will happen if individual countries are forced to resign?

They will not be forced, but the pressure will keep increasing due to the economic depression. The people will turn against the euro and demand the resignation, in Spain and elsewhere.

Does EU wants to keep Greece tied to the the euro?

The people still assume that Greece can not be kicked out of the euro zone and the others will have to pay more and more. But this belief is naive, that will not happen. Even if other states adopt them some austerity measures or promote investment - that will not help the Greek economy to get back on its feet. Greece will emerge, that's just a matter of time.

How it would go on then?

The new currency would depreciate about 50 percent to 70 percent against the euro. In the first year they will have chaos, of course. The Greek financial system would be totally bankrupt, banks and insurance companies would have to be re-equipped with the state capital. There will be capital controls. After about a year I expect to win as tourism and agriculture to Italy, Spain and Portugal, market share and the Greek economy is recovering appropriately.

Felix Zulauf interview part 2: Greece is heading to the exit, Spain might withdraw from the euro zone in 2013

The financial market expert Felix Zulauf expressed his opinion in an interview for Wirtschaftswoche Online that Greece is not the only problem in the EU, but merely the beginning of the real problems. He expects the southern-European country to be the first to leave the Union, followed by Portugal, Ireland and Spain.

Is Greece heading back into bankruptcy?

The mood has changed. And I'm assuming that Greece will become insolvent for the second time later this year.

Are we just beginning a phase of state bankruptcies and exits from the monetary union?

Yes, this process is far from over. Greece alone would still not be a problem for Europe and the euro zone, but it is only the beginning of a problem that is expanding massively below the surface. Greece will probably be the first country to leave the euro zone. The next year Greece will be followed by other countries, probably Portugal and Ireland at first, but then comes Spain. The question is whether the euro zone is ready to bury the project € and go back to national currencies.

Do you think that this is possible?

I suspect that will not happen. The policy will depend on such a project, no matter what the cost is. It has brought untold suffering to Europe. The crisis is almost like a war. It destroys economic structures, businesses and livelihoods. Here is a drama being played out. Maybe Italy is still in a similar predicament as Spain, possibly even France. France is, if there the reform is denied, even at a greater risk than Italy.

Felix Zulauf interview part 1: All important banks have to be nationalized immediately

The financial market expert Felix Zulauf expressed his opinion in an interview for Wirtschaftswoche Online that the only way to prevent the global banking system from collapsing is the nationalization. Greece will not be the only country that will have to give up because of the economic depression, says Zulauf.

Mr. Zulauf, which large European banks will soon run out of air?

Felix Zulauf: In principle, several banks in Europe are already bankrupt, probably even some in the U.S. But governments are not a big bank went bankrupt.

Why not?

The failure of a large bank would lead to another failures since the first bank has been purchased credits or derivatives of the others. It would therefore be a chain reaction and ultimately come to the collapse of the financial system itself. In order to prevent that from happening, over the next two to three years more banks will be nationalized, in the peripheral countries, but also beyond.

Large nationalization will be cheaper in three to four years?

That is right. During the crisis, then all important banks would have to be nationalized immediately - at low prices. Then you would have to suspend bonus payments and maintaining and the bank moves to a stronger capital bases. In its current form, many banks will not survive.