Why Germany might let Europe fall
August 18th, 2011
09:00 AM ET

Why Germany might let Europe fall

By Fareed Zakaria, CNN

This is the moment of truth for Europe.

For the last year or so, the Europeans have repeatedly produced workable compromises that kicked the can forward. They hoped these compromises would quiet the markets.

This strategy was often quite successful. Europeans kept promising, “Yes, we are going to bail out the weaker countries with the greatest debt load, but we want some structural reforms in return. And as we get more structural reforms, we’ll bail them out more. And if the crisis seems more intense, we’ll bail them out again.”

The Europeans repeatedly produced packages that were enough to satisfy the markets.  Their hope was that at some point concerns would dampen down and then in the quiet of the night they could allow a country like Greece to soft default - a restructuring that doesn't spook everyone and doesn’t become a Lehman Brothers-like event.  They sought a quiet reshuffling of debt.

I think this soft landing has now become impossible.

Today what people are basically asking is: “Is Europe’s debt going to be centralized or not?” In other words, is Europe going to be willing to say, “All our debt is pooled together and theoretically, as a single entity, we’ll pay it back.”

The key to this commitment is Germany. Germany is the only country that can pay.

But Germany is increasingly reluctant to do so.  What we're watching is the rise of a new, ‘normal’ Germany, which in turn will lead to the unraveling of the old, highly unnatural structure of Europe.

The old structure of Europe rested on an extraordinary degree of German abnegation of its own interests.  The Germans believed their national interest lay in subordinating itself in every way to Europe’s broader interest.  That was what Europe was built on.

That’s why when you go to Brussels to the European Union you find a French-run affair with Germany’s money - a German-financed, French-run organization.

That has changed.  The Germans, 60-years after World War II, are understandably becoming a more normal country. They are deeply, purely European but they are not going to pursue Europe’s interests at the expense of their own.

Despite what people say, Angela Merkel has been extraordinarily willing to bail out weaker states in Europe.  Obviously, she's tried to get a good deal in terms of forcing some structural reforms in Greece and places like that.  But the real story is that she did this despite German public opinion, which is now 75% opposed to any kind of bailout. This German opposition to bailouts will surely remain going forward.

And if that is the trend going forward, the Europeans are going to have a very, very big problem. There really is no way you can make the numbers work without a much more substantial German commitment of resources than there is now.  If that doesn’t come through, it’s very difficult to see how the euro in its current form survives.

The key to Europe’s future is how Germany conceives of its interests.  If it does so in a way that would be perfectly normal (it is important to emphasize there is nothing scary about Germany simply saying that it wants to do what’s right for Germany as well as Europe rather than always putting Europe above Germany) this might be the end of Europe as we've known it.  It might be the end of Europe as a constructed, political entity built and supported by key nations, particularly Germany, no matter the cost.

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Topics: Debt Crisis • Europe • From Fareed • Politics • United States

soundoff (644 Responses)
  1. GW

    Interesting article. But don't be so sure that Germany won't benefit from taking on debts -http://germanywatch.blogspot.com/

    August 18, 2011 at 11:25 am | Reply
  2. GW

    Interesting article. But don't be so sure that Germany won't benefit from taking on debts – http://germanywatch.blogspot.com/

    August 18, 2011 at 11:25 am | Reply
  3. nimesh

    Aren't we in the US opposed to any and all bailouts?
    Why should germany endlessly bailout the profligate greeks, italians, portuguese, Irish ?
    The peripheral prosperity was fake, built upon euro membership. Now their living standards should deflate naturally. For their own good, they should quit the euro. Reintroduce their old currency. Let the markets decide the correct exchange rates and become exporters.

    August 18, 2011 at 11:28 am | Reply
  4. 7 pillers of Society

    Europe is being punished for their sins. If America is to be saved from the same fate, we MUST take back out country. Either by votes or by blood, America WILL return to its christian conservative roots. Baby killing, Abomination marriage, Race welfare, and Sin culture will be addressed soon enough and liberals will be treated as the traitors to this country and to their LORD Jesus Christ soon enough.

    August 18, 2011 at 11:30 am | Reply
    • Stone

      Ok, who gave the KKK and religious nutts internet access ?

      August 18, 2011 at 11:33 am | Reply
    • Tad Pole

      I call "Troll".

      August 18, 2011 at 11:38 am | Reply
    • el Bruce

      by your logic the Chinese are being 'blessed' with their growth due to promoting abortion?

      August 18, 2011 at 11:51 am | Reply
      • 7 pillers of Society

        Ask the billions burning for eternity how blessed they are. Satan has fooled them with false prosperity. God loves America so we are being punished for our sins. If God did not show us our error, we would be barred from entry into His kingdom like the Asians and the Muslims

        August 18, 2011 at 11:55 am |
      • el Bruce

        nonsense, humans need to evolve past religion much faster than we are.

        August 18, 2011 at 11:59 am |
    • Varun

      Is that you Ted(Nugent)?

      August 18, 2011 at 12:12 pm | Reply
    • Mike

      Holy S__T! I hope this came from a rubber room equiped with wireless internet . . .

      August 18, 2011 at 12:36 pm | Reply
    • Gabby

      *Pillars, firstly. Secondly, Europe is being punished the same way we are - because we spend more than we bring in. God has nothing to do with governments and their budgets.

      August 18, 2011 at 1:42 pm | Reply
    • ZweiStein

      7 pillers of Society...You are a friggin' idiot. Let me restate a friggin' IDIOT!

      August 19, 2011 at 12:05 am | Reply
  5. NoTax

    Time for guns

    August 18, 2011 at 11:34 am | Reply
  6. Joe Bloe

    Sorry to tell all of you this but this is but the beginning of a GLOBAL collapse and yes it is by design. Our leaders actually 'want' global redistribution of wealth so that the economic systems all fail and they can usher in their New World Order.

    August 18, 2011 at 11:34 am | Reply
    • ckelley

      You might want to get a bigger tin foil hat. I think yours is a little small and cutting off the flow of blood to your brain.

      August 18, 2011 at 12:16 pm | Reply
  7. Tad Pole

    I think in many people's eyes the concept of Europe was a social one, and then secondly an economic one. The idea was to have such an interlinked economic system that military interests would always be trumped by economic ones. In light of this, it is easier to understand why countries such as Greece and Portugal, which had poor economic households to begin with, were allowed to cheat a bit in order to get into the EU.

    August 18, 2011 at 11:37 am | Reply
  8. skylark

    Naw.. It's the planet removing viruses (us) and re-booting.
    At 72 I have seen way more than I wanted to but will take the memories of our once beautiful Earth when I go.

    August 18, 2011 at 11:39 am | Reply
  9. Doug O

    We could solve all the World's problems with this one simple step: Pick one day where everyone on the planet wakes up and goes out and kills just one other person. By nightfall there would be enough gas, oil, food, housing, jobs, land, money, etc. for the ones left alive and probably pollution, global warming and a host of other problems could be well on the way to being solved! How does Christmas morning sound to all?

    August 18, 2011 at 11:44 am | Reply
    • Varun

      Can I bang your sis before I kill her?

      August 18, 2011 at 12:14 pm | Reply
      • Doug O

        Yes, as soon as my dog is done with your mother.

        August 18, 2011 at 12:18 pm |
    • SPC Wilson

      Your theory makes a disturbing amount of sense. Ethical quandries aside, the biggest problem with it is the 3.5 billion dead bodies left over as a result. I mean, we could Soylent Green the lot of them, but that just seems like a lot of effort.

      August 18, 2011 at 12:37 pm | Reply
    • Leprakawn

      @Doug:

      Okay, let's do the math here. Everyone wakes up and kills one person. Let's make this simple... a two-person planet, and they are supposed to kill only one person. So essentially you are saying we should kill ourselves.

      I am sure the animals and planet would not mind our departure, though the house pets and zoo animals, et cetera would eventually wonder when they will get their next meal.

      August 18, 2011 at 1:39 pm | Reply
    • JohnnyC

      Doug why not start with yourself? Do it for the worlds good!

      August 21, 2011 at 1:33 am | Reply
  10. clark1b

    if we would stop rebelling against God ... He will be more likely to bless us again.

    August 18, 2011 at 11:45 am | Reply
    • 7 pillers of Society

      Amen Brother

      August 18, 2011 at 11:56 am | Reply
    • ZweiStein

      And when did he bless us? Was it during the Crusades? How about the Inquisition? The Plague? The Phillipino Insurrection? WWI? No? Well maybe WWII? Nagasaki and Hiroshima? Etc etc etc? Tell us pleas...WHEN?

      August 19, 2011 at 12:12 am | Reply
  11. Matt

    What we are experiencing is the decline of the human species' population. For 30,000 years we have been on the growth track. That is about to halt – for the first time. Our cultures and societies are not prepared for that: we assume growth and our principles are based on growth. During our lives we will experience the first decline and perhaps even the population climax around the year 2050. From there, the population will collapse from 8 billion back to 2 billion people, where it may either stabilize – if we focus on durable economies – or collapse further if we cling to our growth mentalities. It is a test of time to see how "flexible" the human species really is. Oh, and by the way, there will be global war and famine for a century.

    August 18, 2011 at 11:48 am | Reply
  12. Doomsday

    Oh yes there is no doubt, the end is coming. I about 2 to 4 Billion years when the sun runs out of hydrogen (fuel). Every scientist knows that and YOU can take that to the bank.
    Until then, many idiots, belonging to all kinds of religions and cults (ever wondered what the difference between those really is? Only how long they've been around!) will regularly come up with dates and collect from the suckers who believe in that crap. About 84% of humanity! IF people woke up to the facts, these scam artists would all starve, instead of driving Rolls Royces.

    August 18, 2011 at 11:49 am | Reply
    • el Bruce

      hopefully we're off this rock in the next 2000 years.. in plenty of time before our sun becomes a red giant. 😉

      August 18, 2011 at 11:57 am | Reply
  13. AgentG

    Not quite that simple to determine exactly what German self-interest is. They export about 70% of their industrial output to the rest of the EU members. If they allow their export markets to fail, that will cause direct damage to the German economy. So the Germans do have a common destiny with Europe that they cannot escape. It's interesting that no one is discussing the root causes of why other EU economies have not prospered. It is not because of excessive budgets alone, but of mismanagement of their economies, primarily liberalization of markets and improving their human capital. At least in the USA you can start a business without much delay and red tape. Interestingly Germany thrives despite its high social costs and highly regulated business environment. That points to human capital as the primary success factor.

    August 18, 2011 at 11:54 am | Reply
  14. el Bruce

    Height of irony – Germany goes from almost taking down Europe 70 years ago to having to bail it out. Embrace change.

    August 18, 2011 at 11:56 am | Reply
    • musings

      Makes sense. Germany is high tech, with not so great agriculture. A lot of Europe is low tech with lots of food production. In order to get the rest of Europe to buy its gizmos, they've had to do more than just get foodstuffs from them – perhaps in the past, they lent money. With the European Union, they just let themselves be taken advantage of, and the working-off-the-guilt thing, now wearing down (especially with the incorporation of East Germany), must be rethought. Apparently given open credit card privileges to the Greeks and others was not working out.

      August 18, 2011 at 12:27 pm | Reply
  15. Ackadamius

    The only solution I can see that has any hope of working (aside from letting countries fail) is for Europe to begin issuing EU Bonds, like Treasury Bonds. They can buy or exchange these for countries debt loads. It won't completely nullify Greece or Portugal's obligation to pay but will spread the debt load across more able-bodied countries.

    It's not a fantastic solution if you're Germany or Norway but it may be the only way to save the European Union and Monetary system, assuming that's what they want to do.

    August 18, 2011 at 11:58 am | Reply
    • Jeffbaseball

      I agree with issuing treasury bonds.

      August 18, 2011 at 11:59 am | Reply
  16. Jeffbaseball

    I think Germany is sending a strong message to the rest of Europe that you're responsible for your own debt. Greece is going to have to get its debt paid off and the rest of the european countries. How to get there is another story.

    August 18, 2011 at 11:58 am | Reply
  17. Wisp

    Wow, illiterate religious discussions.

    Weak minds need Jesus.

    Any Video Gamer knows the solution to solving a "Running out of money" problem. Take over and dominate another country and absorb their resources. There. We'll see another war in the next 5 years, as will europe.

    August 18, 2011 at 11:59 am | Reply
  18. Jose

    Deutschland über alles!!! That this is the reality of the modern Europe is hilarious. I think Rome was great, but as a late bloomer, Germany is kind of Heiß!!!

    August 18, 2011 at 12:03 pm | Reply
  19. fdzdfgd

    The Euro is the renamed Deutsche Mark. Germany indeed runs things. Countries need to control their debt. There is just so little lash back these days from not paying back a debt. back in the days a country got invaded and had their cities quartered by troops when payments stopped.

    August 18, 2011 at 12:03 pm | Reply
    • Jose

      Maybe Germany should go for three?

      August 18, 2011 at 12:04 pm | Reply
  20. Satan Lord of the Underworld

    Yes...The end is near...send me all your money so you may go to heaven

    August 18, 2011 at 12:07 pm | Reply
  21. Master Scott

    The real problem is the international central banks! These super rich vampires are controlling ALL of the stock companies in an effort to create chaos and drive the fear level up. They've done it MANY, MANY times before just not on this level. LEARN YOU HISTORY! YOU IGNORANT SHEEPLE!

    August 18, 2011 at 12:08 pm | Reply
  22. Master Scott

    The real problem is the international central banks! These super rich vampires are controlling ALL of the stock companies in an effort to create chaos and drive the fear level up. They've done it MANY, MANY times before just not on this level. LEARN YOU HISTORY! YOU IGNORANT SHEEPLE!

    August 18, 2011 at 12:09 pm | Reply
  23. Descarado

    Why does this bonehead, Zakaria, have a public forum? He is as clueless as Obama.

    August 18, 2011 at 12:10 pm | Reply
    • Palito

      Because he is smart and an Indian. U dig?

      August 18, 2011 at 12:21 pm | Reply
  24. LKthe3rd

    Let's not be naive and say the Jesus is the solution to our problems. Praying is glorified hope. We should have hope, but tangible solutions is wha's needed. I agree with 'doomsday', the end is coming; when the sun blows up! Humanity has its flaws, but is human to try and correct them; hence why we create governements that will inevitably fail. To say that we should give up and put it in God's hands is the most ignorant thing you can say. They say Faith is hard, but in reality, it's easy to say that God will do it for us. Wake up America! We are on the brink of destroying ourselves and all that half of this country has to say is "God will save us." C'mon guys.

    August 18, 2011 at 12:11 pm | Reply
    • RonFromNM

      One of the most intelligent comments I've read today. Thank you.

      August 18, 2011 at 1:10 pm | Reply
  25. outawork

    The new Reich from Spain to Russia.

    August 18, 2011 at 12:13 pm | Reply
  26. CP

    You hit the nail on the head, Fareed.

    Backing up a bit, though, why did Germany want to control Europe under Hitler? Do any of those reasons still apply? If so, perhaps Germany would be willing to pay for hegemony over Europe? In other words, let them buy control over other nations.

    August 18, 2011 at 12:18 pm | Reply
  27. USA

    Religion or not, we are definitely corroding. We are becoming more and more like the Chinese and India before Christ, politic correctness, no more black and white, everything is Ying and yang, everything is free to do.

    August 18, 2011 at 12:18 pm | Reply
  28. Shinea

    Ironically, Germany may take over Europe after all.

    August 18, 2011 at 12:26 pm | Reply
  29. Neutral

    Every sane person knows the Solution to economic crisis, but dont want to know accept it. It is the 'Interest'. Close down all blood-sucking banks and trade on cash. then there wont be any bubbles, no inflation, and no economic crisis, other than natural disasters.
    After all that's what Jesus was trying to teach Jewish brothers, but they didnt listen.

    August 18, 2011 at 12:28 pm | Reply
    • Halcyon

      I hope you're not saying we should base financial policies on what the New Testament says.

      Because if so, LOL

      August 18, 2011 at 12:44 pm | Reply
    • RonFromNM

      Yeah, and we can all save until we're 60 until we have enough cash for a house. Great plan.

      August 18, 2011 at 1:09 pm | Reply
      • Sal

        Ahahahahahahahaahhhhhh!!!!!

        August 20, 2011 at 6:56 pm |
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