It's clear what Germany is up to. Let the rest of Europe wallow in their own red ink. Let riots in the streets cause regime change. Dangle as bailout bait a "fiscal union" with countries giving up sovereign control of their budgets in exchange for Germany guaranteeing debts. The ECB will do the dirty work but it's Germany alone that will save the day and end up owning Europe. But why?
The euro zone is a wasteland of "entitlementarians" while Germany is an industrial might. But this source of German wealth is sputtering. Germany's industrial icons—Mercedes, BMW, Siemens, ThyssenKrupp—are so '80s. Teutonic efficiency hasn't adapted well to modern-knowledge industries.
Germany doesn't have an Apple or a Google or a Cisco, let alone a LinkedIn or Zynga. SAP is Oracle's weak sister. There's no Pfizer or Johnson & Johnson. Boehringer Ingelheim, Germany's largest pharma company, doesn't crack the top 10 globally. MorphoSys, their largest biotech company, is 43rd globally. Their Neuer Markt (rival: NASDAQ) closed in 2003.
Demographics stink. Go to Germany and you basically see Germans. Entrepreneurial companies require the best, no matter nationality. Silicon Valley feasts on a smorgasbord of international scientists and coders. Same in the London. Germany's no melting pot.
The economic history of war is that when internal wealth creation runs out, you have to beggar thy neighbor. Obviously, there's no military option, but Angela Merkel is on an economic mission. Her goal is to take over Europe and coax out Teutonic efficiency from players in the knowledge economy. Germany needs to harness them and pump knowledge wealth as the Russians pump gas.
Start with French wine, Italian fashion, Spanish farming, and Greek tourism. They can all use huge management efficiencies. In France, bureaucrats control half of the economy. Just privatizing government stakes can set off a productivity bonfire.
Merkel may also have designs on turning East Europe into a startup-driven Silicon Valley. Estonia is critical. Skype, bought by Microsoft for $8.5 billion, was founded there. Silicon Valley startups are hooked on Estonian employees and contract out programming to a country with 22 percent taxes.
Done right, Germany's Europe can kickstart a knowledge economy. Merkel may have Germany on the cusp of lasting greatness by being, well, a little less German--while all the rest are a little more so.