Germany’s revival has reversed its role in Europe. Less than a decade ago, Germany was a bumbling behemoth beset by chronic unemployment and pathetic growth. As its more aggressive neighbors such as Spain, Britain and Ireland rode the craze in global finance to stellar performances, they looked at Germany as their stodgy old uncle, unable to change outdated, socialist habits and adapt to a new world. But the financial crisis proved just the opposite. While Spain, Ireland and other former euro-zone highflyers tumble into debt crises, victims of excessive exuberance and risky policies, a steady but reformed Germany has emerged as Europe’s dominant economic power. According to the OECD, Germany accounted for 60% of the GDP growth of the euro zone in 2010, up from only 10% in the early 2000s. “We changed from the sick man of Europe to the engine,” says Steffen Kampeter, parliamentary state secretary at Germany’s Ministry of Finance in Berlin.
Germany’s engine, however, has spewed toxic fumes. As manufacturers rev exports, the rest of Europe has been unable to compete. Some 80% of Germany’s trade surplus is with the rest of the European Union. The more German industry excels, the more other Europeans feel that Germany’s success comes at their expense, cracking open schisms within the euro zone just when the region can least afford them. “There is frustration with Germany,” says AndrÃ© Sapir, a senior fellow at Bruegel, a Brussels-based think tank. “Germany is moving ahead, but what are they doing for the rest of Europe?”