Critics say Germany is falling between two stools. It has backed EMU rescues on a sufficient scale to endanger its own credit-worthiness, without committing the nuclear firepower needed to restore confidence and eliminate default risk in Spain and Italy. It would be hard to devise a more destructive policy.
There is no change in sight yet. Chancellor Angela Merkel repeated on Thursday that Germany would not accept joint EU debt issuance or a bond-buying blitz by the ECB. “If politicians think the ECB can solve the euro’s problems, they’re trying to convince themselves of something that won’t happen,” she said.
Yet she offered no other way out of the logjam, and each day Germany is sinking a little deeper into the morass.
You can see the Germans’ point. They spent a decade or more after reunification supporting the albatross round their neck of the East with its decayed infrastructure, unproductive industries and bottomless pit of expenditure; now they are expected to use or mortgage their savings to prop up the irresponsible countries of the Med. They clearly had a sense of humor failure when the Greeks in response to the last bailout plan decided to be, well, Greeks.
Also with their experience of the hyper-inflation of the Weimar Republic there are still Germans who know that the ECB just printing paper money is not necessarily the answer rather than a bigger problem. The Germans have been vilified and put upon at the same time by their improvident neighbors, so if they are unenthused, who can blame them?
Nevertheless, with technocrats in charge in both Greece and in Italy, it may well be that the missing element of confidence will return to some extent, but whether before there is more disintegration is open to question.
Meanwhile the Eurogoons are still talking of Robin Hood transaction taxes to kill off our economy in the UK. There is no sense of reality in Euroland. We should leave them to it. It may be better in the long run to accept the need to spend money on refinancing our own banks and trading losses rather than pour money like the Germans into the Euro-pit.