Will German indecision on the euro drag the whole world down?
Monetary union hasn’t worked, but Germany, Europe’s strongest nation, won’t face the consequences.
By Jeremy Warner
14 Sep 2011
Does Germany sincerely want to be in Europe? I pose this seemingly silly question because, as has long been apparent, Europe’s fate lies in that country’s hands. As the great engine room of the European economy, it has the power to save or break the euro.
Rather than engaging in hollow threats to expel offenders, Germany could choose to stop inappropriately imposing its own monetary disciplines on others, and leave the euro itself. In the spirit of altruism, this might indeed be the best thing it could do for its fellow Europeans.
Yet torn between two constituencies – a policy elite that remains wedded to discredited ideas of European solidarity, and the great mass of the German people who do not see why they should be required to subsidise the profligacy of their ill-disciplined fellow travellers – Germany has become paralysed.
Trapped by their history, the country’s leaders seem incapable of facing up to the choices that need to be made to bring the chaos of today’s related sovereign debt and banking crises to any kind of meaningful resolution.
In its indecision, Germany threatens not just the future prosperity of Europe, including its own, but as is clear from the growing alarm of American and Chinese policymakers, that of the world economy as a whole.
There can be no more potent a symbol of how far the centre of economic gravity has shifted than the meeting scheduled for next week of “Bric” nations to discuss joint action to help the eurozone. For the developing world to find it necessary to come to the aid of once-“rich”, advanced economies is a turnaround most of us did not think we’d see in our lifetimes.