Lending Power

Germany's Perilous Role in Europe's Debt Crisis

In a divisive move, Germany and France—leaders of the European Union—have decided to try to change the Treaty of Lisbon, which forms the constitutional basis for the EU. While the Germans and the French want important changes, many of the other twenty-five members do not. The Irish cannot agree to any substantial change in their adherence to the EU without a referendum, which the rest see as a legal Pandora’s Box.

Germany insists on change because of the Eurozone debt problem, which has the Germany electorate upset—for the wrong reasons. That unrest threatens Chancellor Angele Merkel’s center-right governing coalition.

The German public, and many political elites, are troubled because of what the international press dubs the “EU bailout” of Greece from its debt crisis earlier this year. Germans want a permanent EU fund that will spare them from again being called on to solve future EU member failures. They may also want a permanent institutional arrangement for debt restructuring or rescheduling, with rules and automatic punishment for sinners.

That would be more plausible if—as the Financial Times again put it last weekend—the question were really one of “sovereign bail-outs…largely funded by European taxpayers.” Funded is an equivocal word, but it seems to be interpreted by German voters and politicians to mean paid for with money never to be seen again. The thrifty Germans seem to think that their taxes and savings are being taken away to subsidize profligate Greeks lying about on beaches.

Of course, no one is giving anything to the Greeks. The European fund operates in conjunction with the IMF to lend money to Greece if necessary, following the IMF’s time-honored rules for all countries requiring debt relief. Greece will be no exception, and will have to pay back the money with interest.

As the conservative French daily Le Figaro said on November 1, those who purchase state bonds, reassured by the IMF arrangement, run some risk “that their investment may decline in value and have to be rescheduled over time,” but that is the case with any troubled enterprise, and in the case of Greece “there is no risk of failure or bankruptcy.” The EU economy, many seem to forget, remains the most powerful and successful in the world, despite the international financial crisis (imposed on the world by feckless and crooked American high finance, and by American government deregulation and negligence).

European Central Bank president Jean-Claude Trichet—a man of thoroughly orthodox economic views—stood against both Merkel and French President Nicolas Sarkozy in arguing that discussing the debt problem in the dramatic terms used at the meeting where the German and French leaders demanded revisions to the Treaty of Lisbon deters private investors in Europe, pushes up interest rates, and consequently adds to the burdens of the indebted countries.

Another problem is deeper, more subtle, and more important. The EU started out as a method for preventing a fourth Franco-German war, and promoting permanent reconciliation, rapidly joined by Italy and the Benelux countries. For complex and fundamentally generous reasons, it has turned itself into an organization of the entire western and Balkan European States.

For centuries those countries have suffered rivalries, religious and dynastic conflicts, ethnic, economic, territorial, and trade wars. In recent years we have seen the former Yugoslav nations—all ethnically kindred and linguistically linked, but divided by religion and territorial rivalries—throw themselves on one another with a savagery unknown since the Nazi era.

The EU has been a heroic effort to put a permanent end to such things. Europe is a place of immense divergences and historical grievances, and a multitude of cultures and ways of life. The Greeks (and Irish) are not Germans, to put it mildly. Historically, the state has been historically weak or absent in Greece, in the Balkans, and in much of Catholic southern Europe. Family has counted far more.

The wealth of Greece today remains primarily tied to family, and to personal codes and structures of obligation, rather than to an impersonal state. In that respect, Greeks are the opposite of Germans, as are many of Europe’s new members. If Germany behaves as though all of them need to be brought in line with northern European Protestant norms of society and economy, soon there might no longer be a European Union.

Copyright 2010 by Tribune Media Services International


Related: Does the EU Have a Future? by William Pfaff
What Troubles Europe? by James J. Sheehan

Topics: 

Share

About the Author

William Pfaff, a former editor of Commonweal, is political columnist for the International Herald Tribune in Paris. His most recent book is The Irony of Manifest Destiny: The Tragedy of America's Foreign Policy (Walker & Company).