The euro zone is in a recession and Germany's economy contracted by 0.6% at the end of last year. As Merkel remains firm against using a stimulus package and peripheral countries undergo their reforms, the result of her tactics is starting to show: German exports to the euro zone are shrinking because of weak neighboring economies and the strength of the euro.
A flagging export economy will lead Merkel to rely on domestic consumption and other countries to pressure the ECB to lower its interest rates. Merkel should change her economic policy before a sputtering Germany stalls the entire European economy, causing tensions to return to the euro zone. Such circumstances will slow recovery in Spain, which will certainly lead officials to lower its deficit goal.
