Germany’s inflation rate is now structurally higher than in Club Med

The euro zone’s central bank ECB is particularly concerned about a higher corporate debt burden in countries with larger services sectors, because this could increase pressure on governments and lenders in these nations.

“As this support is gradually removed, considerably higher insolvency rates than before the pandemic cannot be ruled out, especially in certain euro area countries,” the ECB said in a statement.

CNBC 19 May 2021

https://www.cnbc.com/2021/05/19/ecb-financial-stability-report-may-2021.html

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German inflation will break above 3pc this year, the highest since the reunification boom of the early 1990s.  This was not supposed to happen under the implicit contract of the Maastricht Treaty.

Germany’s inflation rate is now structurally higher than in Club Med. Greece, Portugal, and Italy are barely out of deflation. 

The eurozone is once again diverging into opposed blocs at different stages of the cycle, with different needs that cannot be met by a one-size-fits-all policy.

When the Federal Reserve finally hints at monetary tightening it will be turbulent but not life-threatening. When the ECB starts to hint at anything similar, the viability of monetary union instantly comes into doubt. 

We are back to the circumstances of the ERM crisis in 1992 when Deutschland Inc was on fire – after the fall of the Berlin Wall – and its economy was badly out of alignment with other countries that had linked their destinies through the Exchange Rate Mechanism for ideological reasons.

Ambrose Evans-Pritchard Telegraph 18 May 2021

https://www.telegraph.co.uk/business/2021/05/18/taper-tantrum-europe-existential-german-inflation/