Sarkozy Threatened to Pull Out of Euro If Germany Refused to Help Greece - So What?

was my first reaction. Go ahead was my second reaction.

President Nicolas Sarkozy 'threatened to pull France out of euro' (5/14/2010 Reuters Madrid, via Telegraph UK)

"President Nicolas Sarkozy slammed his fist on the table and threatened to pull France out of the euro at a meeting of European leaders deciding Greece's aid package last Friday, according to Spain's El Pais newspaper.

"The newspaper cited comments by Spanish Prime Minister Jose Luis Rodriguez Zapatero to members of his party on Wednesday as relayed by people present at that meeting.

"...Sarkozy demanded a "commitment from everyone to support Greece...or France would reconsider its position in the euro," according to one source cited by El Pais.

"Another source present at the meeting between Zapatero and his party members and cited by the paper said: "Sarkozy ended up banging his fist on the table and threatening to leave the euro...This forced Angela Merkel to give in and reach an agreement."" [The article continues.]

That's not even a remotely credible threat - that France would pull out of euro. For what?

Here's the French share of PIIGS sovereign debt:

Greece: $75 billion (or 32% of Greece's debt)
Italy: $511 billion (or 37% of Italy's debt)
Portugal: $45 billion (or 16% of Portugal's debt)
Spain: $220 billion (or 20% of Spain's debt)
Ireland: $60 billion (or 7% of Ireland's debt)
Total: $911 billion
France's share of PIIGS debt ($3.89 trillion): 23%
France's GDP: $2.86 trillion
Exposure to PIIGS debt as percentage of GDP: 32%

Here's the German share:

Greece: $45 billion (or 19% of Greece's debt)
Italy: $190 billion (or 14% of Italy's debt)
Portugal: $47 billion (or 16% of Portugal's debt)
Spain: $238 billion (or 22% of Spain's debt)
Ireland: $184 billion (or 21% of Ireland's debt)
Total: $704 billion
Germany's share of PIIGS debt ($3.89 trillion): 18%
Germany's GDP: $3.65 trillion (2008)
Exposure to PIIGS debt as percentage of GDP: $19%

(PIIGS debt numbers taken from "Europe's Web of Debt" May 1, 2010 NY Times)

Now who's in worse shape?

Germany's share of the bailout plan is bigger than France's, even though the exposure is smaller than France.

Merkel probably relented because she didn't want to be accused of breaking up the eurozone and endangering the EU collapse. She should know better, as France cannot possibly afford to go it alone. She should have called Sarkozy's bluff.

But acting like a madman seems to work well...

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