An EU made in Germany

Suddenly, the Chancellor is ready to do something she has long denied wanting to do. Suddenly, she wants to bind Germany more closely to other European countries – even to countries like Greece, which can hardly claim to be creditworthy. Suddenly, Germany is to collaborate even more closely with its neighbors: in savings, in taxes, even in the matter of retirement age. Suddenly, Europe should be dearer to us than ever – and yet without knowing for sure whether the others want just our money or whether they are actually willing to accept our rules and principles.

All this lies behind the idea of a European economic government. And all this is incredibly unpopular here in Germany. Since the debt crisis broke, the fear of further European integration has grown again. When Germans today hear the word “Europe”, many imagine a loss of control. And fewer and fewer really believe that the euro will one day be as safe and solid as the German mark once was.

So why is Angela Merkel taking this course? And why now? We have to look back to how things stood a year ago. The Greek crisis was escalating through the financial markets, speculators were betting on the collapse of the monetary union, and just before the crash Germany was one of the states that helped out the Greeks with billions of euros in loans. At the same time, though, European governments were bickering over almost every single reform to economic policy. The south demanded unconditional solidarity in particular (read: “more money”). The north wanted security, which to them meant rigid austerity. In the end there was a little of both. But the problem remained. To date, neither the debt crisis nor the question of how to build a Europe that can fight off recession have been resolved.

To end the euro crisis for good, we have to think big

A year ago, more events yet were still to unfold. Just as most Germans did, the Federal Government expected the situation to calm down. And they assumed that our finances would be protected best when as little of our money and power as possible was shifted to Europe. That proved to be a fallacy. For now other countries were being targeted by speculators, accompanied by ever renewed rumours about the impending end of the euro. So yet more billions were needed to rescue the currency. And the German Chancellor was forced to act.

In the long run no government can allow this. That was the lesson that the Chancellor's office learned: To end the euro crisis for good, we have to think big. And that means: first, put an end to the Greek debt misery, i.e. reschedule the debt and in such a clever way that neither the Greek economy nor the German banks stuffed with Greek debt securities collapse. Second, the other countries in crisis must be helped financially. Third – and most important – it must be ensured that this money is not wasted and that Europe maintains good oversight.

It is right at this point that the notion of an economic government à la Merkel emerges as the logical consequence: If we are to take responsibility for our neighbours with our own money, then we must also have a say in how it’s spent. We will give Europe more power, but it has to work according to German principles.

The German culture of stability is finding new converts

Specifically, that would mean growing pressure on the laggards across the EU. France would be urged by the Euro countries to raise its retirement age further. Spain would have to drop the linking of wages to inflation and Italy to reduce its debt. There could be tax guideline limits, perhaps even automatic penalties for inefficiency and a debt brake, as set out in the German Constitution.

That sounds like a Utopia, but it isn’t. For the other governments have also learned their lessons from last year. The German culture of stability is finding new converts everywhere in Europe. In Paris, because it has been recognised there that France is going to have to take on liabilities for countries in crisis. In Madrid, because they greatly fear the country will be bankrupt. In Dublin, because everyone there sees how they are going to have to pay for the mistakes of the Brian Cowen government. And in Brussels, because the place has long since been taken over by the German thinking, more than we want to admit.

So far we haven’t heard this part of the story very often: Europe will be German – at least when it comes to economics, not wine. This is the only story that can be explained to the citizens. Not because there were no alternatives to it. But because it promises a happy ending.

Translated from the German by Anton Baer

Iberian view

Merkel tells Eurozone what's what

"Welcome, Merkel," reads the ironic headline in ABC on the occasion of the German Chancellor’s visit to Spain, which as the daily remarks, following the signing of a government-trade union deal on an overhaul of the country’s retirement system — a measure that had been "demanded by Germany." For the conservative daily, the official photograph of the signing of the agreement is first and foremost a reminder that Spain is “a country of unemployment,” which is why it argues that, "regardless of any public speech made by Merkel," the Spanish will have to accept the need for "urgent and far-reaching” reforms. The same applies elsewhere in Europe, notably in Portugal, where Diário de Notícias reports that Merkel is demanding that Eurozone countries make the “significant concession” of introducing a commitment to reduce spending deficits into their national constitutions. The measure, which for the moment has been rejected by Portuguese Prime Minister José Sócrates, will be ardently defended by Angela Merkel at tomorrow’s meeting of the European Council.