Germany’s Not That Sorry Anymore

And its newfound assertiveness is tearing Europe apart.


With market confidence in Greece and Italy further eroding, Germany’s cash reserves are now the last best hope for the euro. Without a bold, continentwide rescue effort led by Germany, the single currency is likely to disintegrate. Yet it now seems clear, as indeed it should have for the last three years, that Angela Merkel’s government would rather risk the euro’s collapse than act decisively.

Germany has profited mightily from the adoption of a common currency. Blessed with a dynamic export economy that does most of its trade within the eurozone, it has gained more than anyone else from the greater ease of doing business with its neighbors. What’s more, even Germans who remain nostalgic for the Deutsche mark should realize how catastrophic a collapse of the euro would be. The world economy would fall back into recession. German exports would shrink precipitously. German banks, which have large holdings of Greek and Italian assets, would require vast sums from taxpayers to survive. Unemployment and the national deficit would skyrocket.

Germans, in other words, ought to be falling over themselves to protect their currency from meltdown. And yet, at each and every turn, they have done as little as they possibly could. When pushed to the brink, Merkel has been willing to make available modest funds to avoid immediate financial meltdown; under intense international pressure, she has recently persuaded the Bundestag to increase Germany’s contribution to the European Financial Stability Facility, a bailout fund for the euro. But despite periodic promises, she has not even tried to look for a large-scale political or financial plan capable of ending the crisis. In fact, she continues to oppose any proposal — like a truly harmonized fiscal policy or the introduction of Eurobonds — that might help European economies regain the confidence of the markets. Why?

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