The American Spectator

As the German economic miracle evolved, the rest of Europe — eventually including post-Soviet Russia — benefited from Germany’s success that had come about without the military ambitions that had dominated the 20th century twice before. This was the “good Germany”: hard working, economically careful, and non-exploitive of its neighbors, in fact generous in its financial assistance. The 21st century has brought a new problem — and a new Germany.

Put in simple terms, other than Germany most of the European Union led by France is committed to stimulative measures for a faltering economy through deficit spending. Germany, reflecting its naturally disciplined instincts, as well as a desire to protect itself financially, wants the EU to follow the line of carefully organized austerity and decreased state expenditures.

Obviously the French view satisfies popular instincts in debt-ridden Europe as it is based on the concept that government spending can stimulate economies that will, in turn, provide employment and encourage private investment. Angela Merkel’s Germany sees the French plan of its socialist president, François Hollande, as a mechanism to use German money to provide the stimulus to make all that happen. The “good Germans” are digging in their heels. They don’t see much advantage in being that good.

Conveniently available for the blame for the parlous state of current financial affairs in Europe is the American banking crisis of 2008 to which European politicians point when seeking to deflect their portion of responsibility for the sovereign debt problems and banking failures in their own countries. While the U.S. sub-prime mortgage financial meltdown certainly contributed to the global banking crisis, it is factually inaccurate to absolve European, Middle Eastern and Asian participating financial speculators for their roles. And that is to say nothing of the fact that Europe’s sovereign debt is not related to the American private banking issues.

The Germans haven’t wasted much of their time on this irrelevance, but they also don’t see why their country should be expected to pick up the tab for the European Union’s 2012 sovereign debt profligacy. While the EU implicitly counted on a financially sound France and Germany, France in recent years has tended to rely on the economic security that Germany provided. This was the key to the balance that was essential to maintain France’s central role in both the economy and polity of the EU. Effectively therefore the eurozone depends on Germany and the cohesiveness of the European Union depends on the eurozone.

While Chancellor Angela Merkel may pretend acquiescence during international financial meetings, such as the recent G-20 in Los Cabos, the reality is that there is no chance she will agree to Germany assuming the responsibility for Europe’s indebted nations’ recovery unless there is a greater eurozone commitment to fiscal restraint. It would be political suicide for her to do otherwise— to say nothing of very bad national economics. The problem is that Germany may enjoy the status it has attained as the European economic powerhouse, but it is not about to assume the responsibility for a political economic situation contrary to its own best interests. In basic terms Germany considers the essential flaw in the eurozone’s creation to be monetary integration without fiscal integration.

The German people are a far more diverse body than they were when they took on the world in the days of Hitler’s dictatorship. Unfortunately for the German Volk the rest of the Western world may not fully understand the evolution of the country and its people. German government leaders — Merkel or anyone else — reflect their body politic and that means while wanting to be good world citizens, they have no belief they owe the world for their success. They believe in austerity in times of financial stress and expect others to accept that as an economic verity.

When it is argued that Germany has a structural problem due to its dependence on exports to the European Union, the German answer is consistent. In German the expression used is wirtschaftliche Einshränkung; meaning economic restriction or more colloquially, “tightening one’s belt.” When queried why Germany decided to aid Spain contrary to its previous protestations, the response was typically German. In May 60 billion euros fled Spanish banks, ending up mostly in Germany. That was about half the amount that has been made available to the Spanish government that, in turn, will bail out the Spanish banks — that will bail out the Spanish government. Berlin thought that good business and politics. However, as one German banker said, “The first hundred billion is the easy part.”

There’s more than one way to conquer Europe — and get them to like you while doing it. The currently considered concept of naming an All-Europe Finance Minister and a board to guide that individual seems to be gaining approval in Germany. Guess who will control that board and the minister!