Financial Times
January 24, 2012
For almost 60 years, Germans have maintained that it is their responsibility to participate in a modern Europe. Today, Germany’s responsibility is to lead in saving that Europe. This shift is not easy for Germans, who have often been urged to step forward, only then to be criticised for aggressiveness. But no other country can lead Europe out of crisis and into revival.
Europe has stumbled from one partial solution to another, buying time without solving the interconnected problems of sovereign debt, banks and competitiveness. Germany has recently urged a fiscal pact as part of a renovated European project. Chancellor Angela Merkel knows that while Germans do not want to waste money, they are deeply committed to their European identity and will offer support if presented with an achievable plan.
Combined with new governments pushing fiscal discipline and structural reform in Italy and Spain, as well as support from the European Central Bank, Ms Merkel’s new direction has improved prospects. But these steps are not enough. Risks abound.
Italy, Spain and others will find it much harder to make fiscal and structural reforms without growth. What will happen to prime minister Mario Monti’s political support if Italy does not see results? And what are the costs of a eurozone breakdown if seemingly precipitated by German “austerity” policies?
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