Monday, June 11, 2012
We isolate and overload Germany at our peril
June 11, 2012
Visiting the Financial Times a couple of weeks ago, Luis de Guindos, Spain’s economy minister, predicted: “The battle for the euro will be fought in Spain.”
With Spain’s decision this weekend to accept international aid to save its banks, the battle is now joined. The stakes are very high. Writing in this paper, Niall Ferguson and Nouriel Roubini warn that Europe is “perilously close” to “repeating the disasters of the 1930s”.
As in the 1930s, a conflict in Spain is now seen as critical to a wider struggle for the fate of Europe. It cannot be long before an international brigade of Keynesian economists sets off for Catalonia. Once again, Germany is cast as the villain in a pan-European drama.
Of course, nobody questions modern Germany’s democratic credentials. Only in the wilder fringes of the Greek press has Chancellor Angela Merkel been compared to Adolf Hitler. But the picture that emerges from the world’s press is of a stubborn Germany, whose actions threaten the world. This weekend’s Economist magazine cover showed the global economy as a sinking ship and beseeches Ms Merkel to “start the engines”.
The magazine summarises an international “consensus on what Ms Merkel must do”, including “shifting from austerity”, “a banking union with euro-wide deposit insurance” and a “limited form of debt mutualisation”. Privately, world leaders from London to Washington and Rome are urging similar actions on Berlin.