Merkel to Europe: Drop Dead

June 28, 2012 Topic: Currency Region: Germany Blog Brand: Jacob Heilbrunn

Merkel to Europe: Drop Dead

Germany has become the land of the 1 percent. The rest of Europe is the 99 percent.

Has Germany declared war on Europe? Or has Europe declared war on Germany? Speaking to members of the Free Democratic Party, her coalition partner, German chancellor Angela Merkel announced that euro bonds would never be created "as long as I live."

Merkel's remarks created a flurry of fresh consternation among her critics, both in Germany and abroad, as everyone tries to puzzle out whether she really means it or is just bluffing. In part, Merkel is trying to shore up her bona fides at home, especially with the Free Democrats, a classically liberal party that represents industry and views the idea of pooled debt—which is what a Eurobond would represent—with horror. The Free Democrats surely would rather see Greece and other countries depart the euro before the German taxpayer has to absorb the losses accumulated by its once-cherished euro partners down south.

The Social Democrats and the Greens, by contrast, are criticizing her refusal to contemplate euro bonds. They want to become financially bonded to Germany's European partners, or at least say they do, as long as they themselves are not in power. But as an electoral issue, it is a nonstarter. The Germans don't view pooling debt as a way to emancipate Europe. They view euro bonds as representing permanent euro bondage. Malte Lehming, the opinion editor of the Berlin daily Der Tagesspiegel, says, "Thank God we have Merkel. The Euro bonds and calls for more spending represent a failed Keynesianism. Things are going well for us economically. If we had spent hundreds of billions more, what would it have brought us? More debt." Lehming views France's latest stimulus with contempt: "Building more roads creates jobs in the short-term. But it does not create long-term economic activity."

The clash is clear. In Europe, the socialists want to follow the path of the Obama administration, which is to try old-fashioned stimulus. And if the stimulus does not stimulate, the response goes, then not enough stimulation took place in the first place. Merkel and British prime minister David Cameron see it differently. But Cameron really has no voice in debates over the euro. It is the doughty German chancellor who is holding out against the rest of Europe. To understand why Merkel feels so confident, you only need to look around Berlin, which is a vast construction site, a buzz of activity. There is no hint of an economic slowdown. Instead, a new Teutonic colossus is arising in the heart of Europe, one that is not dependent on its neighbors. They need Germany more than Germany needs them. Even the burden of the historical past, which largely dictated former chancellor Helmut Kohl's push for the euro, is ebbing away. A new Germany is emerging.

Whether European Union president Herman Van Rompuy will be able to overrule Merkel is questionable. The latest European summit was suppposed to be the one that solved this problem. But all along the incentive for Germany has been to play out this crisis as long as possible, which means that more lofty-sounding declarations will emanate from Brussels without curing any of the ills afflicting Europe. Whether those ailments can be quickly treated is increasingly dubious. Spain is announcing that even the private highways it built have turned out be be commerically unviable. Cyprus, headed by a communist, wants a bailout.

Small wonder that Merkel and the Germans wish in their heart of hearts that they would all go away. Germany is learning what it feels like to be America—powerful and resented. That is the price of success. But so far, it seems to be one that the Germans appear more than ready to pay. Germany has become the land of the 1 percent, and the rest of Europe is the 99 percent. They will have to get used to it. Germany already is.

Image: א (Aleph)