It seems to me that much of the analysis on how to resolve the Eurozone crisis is premised on the assumption that the EMU has the full political support of Germany. It is assumed that when push comes to shove they will act and implement the technical decisions that are required for the Eurozone’s political survival. This can no longer be assumed, as illustrated by the recent European summit of national leaders.
It is highly possible that the conservative German government would opt out of the Euro as a higher order preference to ensuring its survival. Why would they implement policies (higher wages, eurobonds, domestic stimulus) that will potentially undermine their trade surplus, and competitiveness that has been built up over 15 years?
There is no political or electoral support for increased European integration even if it is technically necessary to solve the crisis. This is particularly the case in creditor countries such as Germany, Netherlands and Finland. National economic interests are conditioning the strategy of these governments, not the survival of the currency union. The latter does not have a country or a national government to do what is necessary. It is governed by a weak central bank, dominated by German political interests.
A game of thrones is taking place in Europe, and rather than risk being unseated by a European political-banking union, or the interest of debtor countries, Germany might act to keep the status quo as it is. They know that excess debt in the South is matched by accumulation in the North. Forcing the entire adjustment on the South (or debtor countries) without changing policies in the North will not only lead to economic stagnation (and deflation) but massive political tension. This is already obvious to anyone who has travelled through these countries.
Doing nothing to solve the crisis, particularly mutualisation of debt, will eventually lead Italy, Spain, Portugal, Greece or Ireland to pull out of the Euro. Germany might well be secretly hoping for the Southern rim to cut itself adrift, even if it will lead to disastrous consequences. But whoever said economics was rational. In a game of thrones, the political elite care little about what happens to the peasants.