Commentators on both sides of the Atlantic have spent the last year trying to explain Germany’s halting, confounding approach to the euro crisis. Digging deep into the country’s history, a recent article in The Economist emerged with a telling question from the theologian Martin Luther: Why should sinners be given an easy way out?
But there is a much simpler explanation: Germans firmly believe in European integration, but they have never wholeheartedly embraced the euro.
Grasping this ambiguity helps explain Chancellor Angela Merkel’s actions — or lack thereof — during the crisis. And it helps explain why Germans first tore apart the new euro rescue fund in public debate — only to turn around and adopt it by a huge majority in the Bundestag.
Most important, it makes clear that the euro crisis is not just an enormous challenge, but also a historic opportunity for Mrs. Merkel, and for Europe. If she can persuade her fellow Germans to back the rescue effort as a necessity to save the union, then it is likely not only to survive, but to emerge much stronger. But if she sells it as merely a way to support the euro, then Germans could balk and the entire enterprise would be at risk.
Germans never had a love affair with the euro, because they never really needed it. The country had a very stable currency, which both guaranteed the lowest interest rates in Europe and symbolized the country’s postwar success.
Still, Germans understood that reunification had changed the state of play, that the hegemony of the German mark would be unacceptable to neighbors of a united Germany. Giving up their currency was the price they knew they would have to pay for reunification, the pledge to ensure that their economic strength would not turn into political supremacy. Germans honored this pledge without complaint, because they saw it as the means to an end: the best (and only) way to lasting peace and prosperity was to create an integrated Europe.
Why hesitate now? Despite Germany’s image of strength abroad, at home it feels much less secure. Digesting the financial burden of reunification, and the introduction of the euro during the last decade, has hardly been easy. What’s more, after the Lehman Brothers collapse, Germany’s recession was one of the deepest among industrialized countries. Yes, things have improved, but the fragility of their export-dependent model has not escaped the cautious Germans.
Germans also worry about the long term: growth today does not solve the problems of an aging and shrinking population, a creaking education system, an over-stretched welfare system, a dysfunctional immigration policy and the phaseout of nuclear energy.
Then there is the simple matter of political inertia: Germans are in love with the status quo. The private sector takes risks, but politicians don’t. Requests to spend billions in support of other countries don’t sit well with Germans.
Consequently, when the crisis erupted, Mrs. Merkel’s initial focus was technical, aimed at repairing and improving the control and supervision of the euro zone. Without proper controls, Germans believe, the simple transfer of money is bad policy and sets the wrong incentives.
But as much as that approach might appeal to Germans, markets will not wait for treaty changes. With the crisis threatening to spill from Greece to other countries, it became necessary to build a robust line of defense in the meantime — hence the bailout fund. However, as long as this rescue shield was “sold” only as a measure to keep the euro alive, it failed to resonate with Germans.
During the summer, it dawned on Mrs. Merkel that this crisis required more than repair work. And she realizes the stakes involved: if she can pull the European Union out of this mess, she is assured a place among the great leaders of Europe. Therefore, she recently began to argue that the crisis was no longer just about Greece or the euro. “If the euro fails,” she has said, “Europe will fail.”
Her support was enough to win approval for the bailout fund. But the fund will only (with luck, and if Slovakia finally agrees) stop the bleeding. The question now is whether she can generate support and enthusiasm among status-quo-loving Germans for the long-term solution — yet another major change to the European Union treaty.
Taking such a risk is not exactly Mrs. Merkel’s traditional way of doing business. She prefers to take the cautious step-by-step approach, leading from behind. But, as one observer put it, even if our headlights reach only so far into the fog ahead, we might still want to tap our ultimate destination into the GPS. This is what Helmut Kohl did as chancellor in 1989 and 1990 when he surprised the country and the world by tightly embracing German reunification. It was a bold step forward, and it worked.
If Mrs. Merkel does the same today by defining a forward strategy for the euro zone and the European Union, by proposing powerful new institutions like a European finance minister and a permanent European monetary fund, Germans might grumble, but they will follow — even if, like Martin Luther, some of them feel that sinners should not be offered an easy way out.
Wolfgang Ischinger, a former German deputy foreign minister and chairman of the Munich Security Conference and an adviser to Allianz, an insurance company.