Financial Times
February 1, 2012
Yesterday, I was in Berlin where the temperature was -9. Today, I’m in Moscow – where its -19. But that’s enough about the weather, and about Russia (for now). It was an interesting time to spend a couple of days in Berlin, coming just after the EU summit, so let me summarise my impressions on where Germany stands on the euro-crisis.
1. They are reasonably pleased with how the fiscal pact came out. Nobody thinks it’s a complete answer. But it’s viewed as a necessary step on the way to getting European finances back in order. The most important feature is that fiscal restraint will be incorporated into national law which – it is reckoned – will be harder to ignore than the European kind.
2. There is considerable impatience with the Davos-led, Lagarde-Cameron-Geithner line that Germany has to throw more money at the problem, by building a bigger firewall and rebalancing its trade. “I simply don’t understand them,” says one senior official. “This is a problem that will not solved by the ECB or bazookas or bigger firewalls. It can only be solved by growth. And the only long-term route to growth is structural reform.” Another official, close to the chancellor, says that bitter experience has taught the Germans that the markets are not easily satisfied. Build a “bigger firewall” now – and they will be back for more soon. The Germans also mistrust the southern European claim that the firewall is just there to shock and awe the markets. “They don’t want this money just to frighten the markets”, says one official. “They want to use it.”
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