While we’re sitting on the edge of our chairs, waiting breathlessly for the Greek election, or for Fate to swallow Greece and send financial Armageddon over the Eurozone, stock markets rallied. Not because of a sudden plethora of good economic news, but in anticipation of how central banks might react to the Greek vote—that’s how far this farce has come! As if sheer artificial liquidity could wash away the putrid odor of decomposing debt.

They lined up on Friday to give their spiel. ECB President Mario Draghi would “continue to supply liquidity to solvent banks where needed.” Bank of Japan governor Masaaki Shirakawa was “prepared to take all possible measures” but denied rumors that central banks around the globe would take coordinated action. The Bank of England spoke up. The Swiss National Bank confirmed its iron determination to keep the flood of euros at bay, with capital controls, if it had to; its currency peg would hold, come hell or high water.

To calm the credit markets, it was leaked earlier that Draghi, European Council President Herman van Rompuy, European Commission President José Manuel Barroso, and Euro Group President Jean-Claude Juncker were feverishly bent over a grand plan to convert the beleaguered monetary union into some sort of federal state governed by unelected EU bureaucrats.

So, while waiting for the vision to appear, I skyped with a friend in Germany who owns two restaurants. They’re doing well, he said. 2011 was a record year, and this year looks good too. He’d redecorated, his new menu was a hit, and he was excited, though it was a day-to-day struggle, in a jungle of regulations, with taxes out the wazoo. And what about the debt crisis? He didn’t pay much attention to it, he said.

Indeed. The debt crisis has been good to Germany, formerly the “sick man of Europe.” After Reunification, Germany was marked by high unemployment, stagnation, and lacking innovation. The dotcom euphoria bypassed it. Inflation surged and real wages declined. Industry restructured, ditched unprofitable operations, axed workers. But countries around it boomed. Spain and Greece were riding high. The Celtic Tiger was cleaning everyone’s clock. And Germans became morose. Eventually, the internal devaluation, insidious as it was for the middle class, paid off for industry. Exports took off, and Germany was showing signs of growth.

Then the financial crisis hit. Export orders fell off a cliff, causing GDP to plunge 2.1% in the fourth quarter of 2008 and a horrid 3.8% in the first quarter of 2009. Annualized, those two quarters printed a double-digit decline in GDP. The worst two quarters in the history of the Federal Republic. The German economy lives and dies by its exports.

But as the financial crisis morphed into the Eurozone debt crisis and began infecting the periphery, Germany recovered. Exports to Asia skyrocketed, exports to European countries did well, and a good part of the US stimulus money made its way to German enterprises, such as Siemens and its suppliers. They produced and hired. Exports last year exceeded €1 trillion for the first time ever. Unemployment dropped to a two-decade low. Its budget is nearly balanced, and yields on its debt probed zero. Euphoria set in.

Short lived, it seems. According to a slew of recent data, Germany is backsliding. Its banks are highly leveraged and packed with who knows what kinds of decomposing assets. Its debt, at 81% of GDP, is high for a country that can’t print its own money, and is higher than that of Spain. If China implodes and the US enters a recession, while the Eurozone continues to teeter, German exports will once again collapse. The savior of Europe will find itself in a deep recession, with large deficits, rising unemployment, spiking yields….

“Germany’s strength is not unlimited,” Chancellor Angela Merkel told the Bundestag on Thursday. She was committed to the euro, she said, but would eschew counterproductive quick fixes, such as Eurobonds and other forms of debt sharing. She was addressing President Obama, French President François Hollande, and her European counterparts who have been demanding that the German taxpayer pick up the tab for the profligacy of others.

The same day, the French government drove a wedge into the rift between the two countries, the core of the Eurozone. Without it, nothing will work. Hollande, while in Rome to form an anti-Merkel triumvirate with Italy and Spain, presented his plan to save the Eurozone: institute “euro-bills” (his word for Eurobonds) and use ECB funds to recapitalize banks (via the ESM).

Panic attack, it was called in Germany: the French mega banks, chock full with rotten assets, were teetering, and to avoid having to beg Germany to help bail them out, Hollande wanted to change the rules so that he could ask the ECB instead.

Then, Prime Minister Jean-Marc Ayrault suggested that Merkel shouldn’t “sink into simplistic formulas.” And Arnaud Montebourg, Minister of Industrial Renewal, accused her of “ideological blindness.”

Friday, Merkel hit back. “Pooling the debt may be of interest to some, but in Germany, it would lead to mediocrity,” she said. “And mediocrity must not become the standard in the Eurozone”—thus slapping the M-word on the French.

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