Tuesday, June 12, 2012

Germans, the Euro and the Painful Truth

by Charles Grant

New York Times

June 12, 2012

Will the Germans save the euro? Many people within the European Union and further afield are urging Berlin to take bold steps to secure the currency’s future. They have become frustrated by the Germans’ apparent inaction.

But the view of German policy makers — conveyed to me on a recent visit to Berlin — is that the government will do what is necessary to save the euro. What it will not do, they say, is spell out in public the measures they are prepared to take, lest that encourage the euro zone’s problem countries to slacken efforts to curb budget deficits and enact reforms.

However, the best intentions of German policy makers do not guarantee the euro’s survival. Whatever measures they deem necessary will have to clear the Bundestag, where many members oppose greater German generosity to Southern Europe, and then the constitutional court, which tends to cavil at more powers for the European Union.

The court of public opinion also counts, but German leaders have seldom explained to voters how the euro underpins their prosperity. And in the event of a financial panic, perhaps prompted by a Greek exit from the euro, could Germany’s politicians respond quickly enough?


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