How Volkswagen's fall could hurt Germany — but help Europe

Germany's pain could be Greece's gain

Volkswagen
(Image credit: Arno Burgi/dpa/Corbis)

The trainwreck that is eurozone macroeconomic policy has been out of the news for a while, but the continent is still struggling with high unemployment and a wounded economy produced by the Great Recession. If you want an insight into just how perverse the eurozone's circumstances are, consider this: The Volkswagen bombshell, while it could certainly hurt Germany, could very well help the embattled European debtor nations like Greece and Spain.

The revelation that the iconic German automaker has been using deceitful software code to defeat U.S. emissions testing has shaken Germany's long-standing (and often high-handed) reputation for moral rectitude. But beyond that, if Volkswagen's North American car sales seriously drop, that could damage the automaker's finances. And while the $18 billion in potential fines it faces are survivable, they would be a brutal hit. Volkswagen's yearly profits are only $2.8 billion, and the company has $24 billion in cash reserves.

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