Time for Flush Germany to Put Europe First

by Simon Nixon

Wall Street Journal
July 6, 2011

It can't have escaped many people's notice that Germany is so far having a terrific euro crisis. While large swathes of the periphery contemplate years of slump, the continent's biggest economy is enjoying robust growth, booming exports, falling taxes and rising living standards.

Germans claim this is mostly due to painful reforms over the past decade that turned the former sick man of Europe into its most competitive economy. But also important have been a weak currency, near-record-low borrowing costs and the willingness of its European neighbors to keep buying German goods—often with money effectively borrowed from Germany. Truly, it's an ill wind that blows no one any good.

On that basis, it's hard to dispute that the euro-zone bailout programs have so far proved remarkably good value for Germany. The country has had to hand over very little cash, the bulk of the bailouts having been provided in the form of debt guarantees, typically at juicy margins of interest. All the pain has been taken by peripheral countries that are making huge sacrifices to stay within the single currency. Ireland, Greece and Portugal have introduced extraordinarily tough austerity measures after the European authorities made clear they wouldn't allow defaults on government or bank debt.

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