Wednesday, May 23, 2018
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Germany to the rescue?

The future of the world is not supposed to hinge on Germany's decisions. Preventing that was a consistent theme of great-power politics in the 20th century.

Yet a decade into the 21st century, all eyes are on Berlin as the world searches for signs that Germany will use its economic might to rescue Europe's currency and, with that, the world economy.

This is not the role Germany would have chosen for itself. If its postwar politicians had their way, they would probably remain subsumed in the bland collective identity of the European Union.

That is not an option anymore. But how should German Chancellor Angela Merkel wield that power?

Her country's taxpayers understandably resist bailing out mismanaged Southern European governments. German courts may not let Berlin participate in some proposed solutions, such as jointly guaranteed "euro bonds."

And as Ms. Merkel and her officials have argued endlessly, there is no point bailing out insolvent countries merely to enable continued overspending. No doubt they are right that permitting the European Central Bank to buy unlimited quantities of distressed sovereign bonds is a gamble that would put Germany's wealth disproportionately at risk.

Yet Germany's exporters profited from the southern European spending spree that German politicians now condemn. There is a tension between its rhetoric about saving the euro and Europe and its hesitation to pay for those lofty goals.

The world's patience has worn thin as one limited rescue plan after another has failed, bringing Europe to the brink of financial collapse. Analysts warn of a worst-case recession that could shrink Europe's weaker economies by half, and Germany's by 20 percent or more.

Bank lending is evaporating, and interest rates on government debt are spiking to unsustainable levels. For the United States, the threats include bank losses and diminished exports.

Ms. Merkel wants to change the 27-nation European Union treaty to impose the collective fiscal discipline that was absent at the euro's creation. But there is no time for that now. The most that can be hoped for are guarantees by the 17 nations that use the euro to ensure that bailed-out countries control their debts.

Such a commitment would give Ms. Merkel the political cover she needs. It's to be hoped the chancellor's resistance to radical measures so far has been tactical -- a politically necessary effort to show her people that she drove a hard bargain in return for their money.

Even if Europe staves off short-term disaster, its troubles may be only beginning. There is no lasting solution to Europe's multiple sovereign-debt crises unless and until countries rekindle economic growth, but austerity works also in the opposite direction.

The crisis has illuminated once again the democratic deficit at the heart of the European project. If the euro is to be saved, it will require sacrifices, in both prosperity and sovereignty, that the continent's peoples probably would reject if they could. Adding to that is the resentment building between Germans and the recipients of their grudging largess.

Those long-term issues will be harder for Europe to address if it cannot prevent short-term collapse. The choice is between a truly desperate future and a merely bleak one. It's up to Germany.

-- Washington Post

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