by Calculated Risk on 9/10/2012 10:43:00 AM

This is an interesting piece from David Keohane at FT Alphaville: German domino theory and book-cooking

There are two fairly important bits to this story in Der Spiegel.

One, that Merkel wants to avoid a Grexit for the time being and two, that the upcoming Troika report might be massaged to make that a reality.

From Der Spiegel (with our emphasis):

In reality, Merkel has already made up her mind. After long hesitation, she has sided with French President François Hollande and the European Commission. The report from the troika — which consists of the European Commission, the International Monetary Fund (IMF) and the European Central Bank (ECB) and which departed on its fact-finding tour last week — will undoubtedly conclude that Greece can remain in the euro zone.

The change in mind-set is down to domino theory.

Where once the chancellor saw Greece as the weakest link in a chain which would be stronger without it, now she sees it as a domino which, if toppled, would put the rest of the set in danger ...

Keohane goes on to discuss domino theory and the key word: "undoubtedly". The story makes it sound like the outcome of the troika's audit is preordained.