Germany & Greece: Reluctant Love-birds

Good read on Germany & Greece’s reluctant embrace in the latest LRB”

… the new German attitude has the potential to destroy the Eurozone. If European monetary policy is run according to German national interests, huge structural imbalances will accumulate. The Germans will then either have to pay to correct those imbalances, or agree that the euro should not be run primarily according to German national interests. If they are unwilling to do either of those things, the euro can’t survive. It’s hard to tell exactly what Merkel thinks about all this. She is nobody’s idea of a caricature spendthrift, happily chucking money in the direction of the undeserving poor. Whenever the question of bailouts is mentioned, Merkel acts out an elaborate pantomime of reluctance to dish out more cash. It’s hard to tell whether she is really-o, truly-o this reluctant, or whether she’s hamming up her unwillingness for a domestic audience which strongly dislikes the idea of bailing out work-shy Southern Europeans. The fact is, though, that they are going to have to continue to do that, if the euro is going to continue to exist in its current form. Germany has to put the broader European interest on the same level as its own national interest, or the euro is toast. This, if you think about it from a broad historical perspective, is quite a reversal. During the 20th century, the greatest danger to European stability was Germany’s sense of its special destiny. During the 21st century, the greatest danger to European stability is Germany’s reluctance to accept its special destiny. If the German taxpayer manages, however grudgingly, to accept that it’s her duty to shoulder the burden, the euro will muddle through. But it won’t be pretty.

via LRB · John Lanchester · Once Greece goes….


  1. This whole issue of the euro acting as an adhesive between countries that would otherwise be reluctant to bind themselves together is fascinating. However, it begs the question, at what point does the euro become divisive, or worse, inflammatory? Germany may be in a position to regulate the euro markets to an extent, but as mentioned in the article, why should they? It seems that one of the fundamental failures of the euro system is the inability to create a sense of international unity. Rather, there are several countries who get what amounts to a "free ride" while others feel chagrined at their role of parental figure. And with no practical means to assert authority under the current system, the more successful economies such as Germany are forced to either grin and bear it or accept responsibility for the downfall of an international community.

  2. James Cameron says:

    A marvelously written and entertaining article on the subject . . . thanks for highlighting it.

  3. I assume '' huge structural imbalances will accumulate'' means Greece imports more than they export, paid for with loans from the exporters like Germany. See for example the similar situation between USA and China. BUT: this only happens if the exporter is willing to pay for the loans. China is for whatever reasons. But nobody forces Germany to loan the money to Greece. So the author leaves out the third option: Greece does not get the money to import too much and is forced to live within its means. And Germany can still continue it's exporting strategy by exporting to the rest of the world. There are plenty of customers wanting to buy their products. Where they get the money from is not their problem as long as they don't need to pay for it.