I was in Berlin to meet with a group discussing “Future Megatrends” at the Bertelsmann Foundation, and our group also hoped to meet Frau Merkel yesterday. But that meeting was cancelled — apparently because the PM is frantically preparing ways to win over the expected new President of France after the election on Sunday.

I asked the “serious people” here whether Hollande’s victory and his leading an effort to rewrite the Stability Pact to put more money into growth and be less stringent on governments would force Germany to change its position.  The answer I got was a firm “NO.”  Germany’s elite is both very secure and very stove-piped.  Thus its bankers focus entirely on preventing inflation; its labor minister on keeping good labor-employer relations; its foreign minister on relations with Russia, and so on.  No one really has a huge stake in sustaining the Euro or the EU any longer.  Instead, a unified Germany doing well is a power in its own right, dealing with Russia and China to build a Eurasian trade zone (Germany takes raw materials from Russia and fashions them into machine tools and luxury products for China).  As far as German leaders are concerned, Germany is doing everything right, and if other countries can’t keep up, so much the worse for them.  Germany feels absolutely no obligation to sacrifice its own prosperity, credit rating or low inflation to bail them out of their troubles.

Ordinary Germans, to the extent they have influence, simply want to enjoy the benefits of Germany’s strong economy.  For many years, they have suffered minimal wage increases and are now campaigning for significant wage hikes.  Germany can probably afford them now, but the last thing these workers want is to see any of Germany’s money or credit go to Greece, Portugal, Spain, or Italy.

Yet those countries desperately need a bail out or depreciation, as their banks and governments are too far gone in debt to pay it out in current, strong, Euros.  With unemployment soaring throughout the southern tier of the EU, and economies growing slowly or slipping into recession in the north (UK, Netherlands, Germany), something dramatic needs to be done, and soon.

My current expectation is that the Euro zone will split.  Countries with strong credit (France, the Netherlands, Denmark, Finland, the Baltics, Germany, possibly Belgium) will stay with the Euro.  Countries with weak credit will then use a new joint currency, the “New Euro,” which will be issued at perhaps a 20% discount to old Euros in exchange for cash and balances.  Consumers and firms will take the haircut, but banks will be allowed to exchange their Euro holdings at par and have their debt revalued in New Euros, giving them an instant 20% write-down on debt.  New Euros will perhaps drop further, but they will find a level that will help restore competitiveness in the southern tier states.  Meanwhile, with only two currencies and free trade maintained throughout the Euro zone, things should remain relatively simple.  At least that is what I expect.

We will have to wait a bit to see whether Greece’s election produces anything like a functional government or a hung parliament, and whether Hollande’s supporters are also able to win him a parliamentary majority in France.  So not everything will be decided on Sunday. 

When I arrived in Berlin on Wednesday it was 81 degrees and sunny.  But today it was a cold and blustery 50 degrees.  That may be a metaphor:  the wind is blowing chill against the Euro seeing out the year.

Two other things about Germany today.  One is a real, palpable sense of pride.  This is a country that was torn apart in WWII, and not only struggled with this division but with the guilt and shame of the Holocaust hanging over them for a generation.  Now, that all seems in the past.  The huge task of unifying Germany and rebuilding Berlin as a unified capital is done well enough that you have to look hard to see the past.  Some old DDR architecture remains, but much of East Berlin is now as swanky and chic as the West, or has beautifully rebuilt its 18th and 19th century palaces, churches, and other monuments.  The Germany of Hitler is receding and the Germany of Mozart, Haydn and Beethoven is moving forward.  Germans are proud of their industries, their cities, their culture, and their achievements in overcoming the traumas of their recent past.

Second is the remarkable progress that has been made in dealing with immigration, especially the Turks. As of 10 years ago, non-ethnic German migrants are eligible to obtain German citizenship, and significant numbers have done so.  Discrimination remains, of course, but it is nothing as horrible as it was 10-15 years ago.  Think of the progress the US made with Blacks from 1960 to 1975, and you get some idea of what has changed here.  Of course, there is still a long way to go on both women’s progress and minority respect before there is a German Barak Obama or Carly Fiorina (the boardrooms remain overwhelming male).  There is also still a significant gulf between West Germany and the East (where an enormous amount of employment is either direct in government positions or in government-funded reconstruction).  But the anxious, defensive, almost xenophobic Germany of the immediate post-Cold War period is fading away.  Germans are now more relaxed, serene, and confident in what they are doing — but whether that is a good thing for Europe as a whole remains to be seen.