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 (704 Responses)
  1. gtbdave

    The EU is the #1 economy in the World. The largest trading block, with more than 500 million consumers, almost twice as large as the US. China has a billion people, but they only make about $800 a year, but they are growing. The largest trading block of middle class consumers will dominate the World economy, as the EU does now. If the EU is gone, there's really not much left of Europe, it can't compete on the World market. Many wish the EU was gone, don't even acknowledge that it's the largest economy. The EU could make huge mistakes, have huge setbacks, and still emerge as the World's #1 economy. If the EU is gone, that leaves China and the US, and China is already predicted to be the #1 economy, maybe sooner than later, given all the mistakes the EU has made, and the US. With the US in deep recession, the EU gone, that leaves just China, with authoritarian capitalism, democratic capitalism, as practiced in the US and EU, would be almost gone, a victim of right wing economic practices. What makes German strong is that they still have a manufacturing base, people still make money there, from work, not just with paper, they have unions, they have a middle class. Workers there generally make more than American workers. What's needed is to follow Germany example and make more middle class consumers, not destroy your middle class. Those Nations without a substancial middle class is the ones that are in deep trouble.

    August 20, 2011 at 11:10 pm |
  2. azezel

    This is all a fading dream. We have been living on the legacy of a productive tradition that has finally topped out and now is going down. If things are taken into consideration now, the process could be reversed. More that likely it will not.

    August 20, 2011 at 11:31 pm |
  3. Hello

    Definition of anti Christ accordance to the bible. Anyone who does not believe Jesus Christ has risen from the dead. This is the view of the Jehovah Witness.The Pharisee's did believe in GOD, and also crucifixed the Christ, Jehovah witness is a modern day Pharisee.

    August 20, 2011 at 11:38 pm |
  4. EM

    Germany has already bailed somebody out once and suffered the dilution of its economy. That "somebody" was: East Germany.

    I highly doubt that Germans (specifically, those living in what used to be West Germany) are willing to do that again. West Germany was highly prosperous before 1991. After re-unification, taxes went up substantially for West Germans, as their economy was used to help rebuild East Germany. Not to mention the million or so unemployed East Germans who flooded West German towns and cities looking for work.

    They were not happy about helping out even fellow Germans.

    So you can imagine how they would feel about suffering even further dilution of their economy to help out the Greeks, the Italians, and the French.

    August 20, 2011 at 11:50 pm |
  5. ray matthew

    I remember saying to several people about a year ago that germany could possibly cause WW3 without firing a shot. If they declare that they leaving the EU and going back to the deutchse mark it would cause turmoil in world markets. What would the ripple effect be? I would like to hear anyone's opinions or insights.

    August 21, 2011 at 12:31 am |
  6. BostonBob

    I do not blame Germany. They did the right thing and were fiscally responsible. They have absolutely no obligation to Greece or the others. I wonder...can we do that with California?

    August 21, 2011 at 2:24 am |
    • Guest comment

      Nope, the Becham's live there...............

      August 21, 2011 at 10:14 am |
  7. Franck

    Germany will finally accomplish in five years,what two World Wars failed to do,the conquest of Europa! And forget China
    and India the problems their societies will have for the next two generations I wouldn't wish on Stalin.

    August 21, 2011 at 2:47 am |
  8. faw_king

    thats what happens when u let jews control global economies. nothing will ever get better as long as they run the system

    August 21, 2011 at 4:03 am |
  9. dougx

    The glorious fatherland has prevailed.

    August 21, 2011 at 4:12 am |
  10. admiral149

    Germany more than any country in the world has experienced bankruptcy, and inflation, caused by printing money to pay debts after WW1. Germany's post war economic collapse lead to Hitler, and WW2. Germany does not have the capital to fix her neighbors negative cash flow. Only Greece, or Ireland, or France, etc., can solve their own economic problems by drastically reducing government spending, and cutting taxes, and reducing regulations on business. Big spending governments do not need more loans when they are unable the repay what they owe now. Big spending governments must stop spending. Germany would only be hastening her own economic demise.

    August 21, 2011 at 8:16 am |
  11. Heyryk

    What do you want that Germany give all its assets and its blood and become wake as the others that expend the money as millonaires.

    August 21, 2011 at 9:06 am |
  12. CharlieSeattle

    Europeans are are all in favor of increased taxes, just as long as Germany pays them.

    August 21, 2011 at 11:10 am |
  13. malasangre

    the world economy went to heck because Nixon didnt want to pay our debts with real money and closed the gold window. oh yeah thanks for making China our economic rival too all goes to Tricky

    August 21, 2011 at 11:35 am |
  14. Juan

    Well, hope the value of the Euro goes down. I really would like to save money next year when I go to Europe.

    August 22, 2011 at 12:51 am |
  15. Pleb

    The EU is a bad system and should be done away with – each country for itself – away with globalization !

    August 22, 2011 at 12:58 am |
  16. David Prosser

    Isolation won't solve anything in the long run and such action by Germany would only come back to bight them in a number of other ways. Just think if the situation were then reversed in the near future. Then others would be reluctant to help Germany.

    The point is that these economic crisis affect everyone to some degree. So only by all nations coming together as one will there ever be a lasting solution. Otherwise the idea of kicking the can down the road will continue indefinately. One nation will continue seeking to exploit all the others and economic imbalence will perpetuate on and on.

    August 22, 2011 at 2:41 am |
  17. David

    Fourth Reich Fighting Men

    August 22, 2011 at 3:03 am |
  18. corey d.

    Here's why Germany should do what the U.S. did directly after WWII – because the world needs it.
    The U.S. invested heavily in all factions of the rebuilding of Europe after the second world war – all while there was so much rebuilding needed here. Hence, the greatest generation.
    Germany clearly is a nation of thinkers, innovators, futurists, etc.. But are they humanists? Can they come back as the good guy nation after creating damage over fifty years ago that rocked all of Europe and the world? Long time ago? Not long enough. If Germany can make good decisions now then they will be regarded as the savior of Europe rather than the shadow that has been left by the first two world wars.

    August 22, 2011 at 8:54 am |
    • Chris

      Nope. Germany will be the bad guy whatever they do. If they don't bail out, they will be called selfish, if they do bail out they will be called stupid. No way to do it right.

      August 30, 2011 at 5:20 pm |
  19. Feo

    What's happened to common sense? Germans understand austerity and it's time for all countries to start living within their means. If I've got $10 in my pocket I shouldn't be able to spend $20 and figure out how to pay for it later, I should spend $5 and save the other $5 for a rainy day. Thanks mom and dad for teaching me that difficult lesson.

    August 22, 2011 at 9:55 am |
  20. Tony

    The whole problem with all these comments is my case in point here... When will people leave friggin Religeon out of things that it does not belong. I can think of only 2 wars that didnt revolve around Religeon! Do you really think that any of this can or should be resolved around some invisible all knowing, all seeing dude in the sky that is coming back? I mean what is he, she, it coming back for? What possibly does our mortality have that would be so valuable to such a belief? Sheeesh... dont spend more than you have and there wont be financial ruin!

    August 22, 2011 at 10:14 am |
  21. Back on Topic

    Is Germany any different from the rest of the world? The Germans want the benefit of the Euro – a lower currency exchange rate for the Euro vs the stand alone Mark but do not wish to pay for it by financially supporting the Euro as a true European currency. Sounds like the rest of the world. Give me my benefits and let someone else pay for it.

    August 22, 2011 at 10:20 am |
    • Chris

      Except that Germany has been the guy who pays all the time.

      August 30, 2011 at 5:22 pm |
  22. frank hirsch

    Germany has allways ben the scapegoat for the western world . The 1st world war , a most ridiculus reason. The tready of Versailles without german representation and the invitation of the (schikelgruber) and the american financed 2nd world war. The 1ist by the Rothchilds. America fell asleep wilth its victory hangover till after1970 while the other manufacturing nations were running all over U.S. With the American infighting with its raciall and ethnic differences and the blame upon the white evil man it cannot survive an will crumble into different states of the mentioned factor.

    August 22, 2011 at 1:29 pm |
    • Jimmy Cracorn

      Yea beacause if that were going to happen it surely would be now rather than say, the Civil war, or the Great depression, or the Revolutionary war, or the Dust bowl. We really don't have a history of overcoming adversity so your probably right.

      August 23, 2011 at 1:32 am |
  23. Jimmy Cracorn

    I wonder what Iran will do with all of the Euro oil money they have made after demanding they be payed in it rather than the Dollar. HAHA serves them right I hope they go bankrupt

    August 23, 2011 at 1:28 am |
  24. BigRay

    Religion and Political power are the same thing ... a relatively small group of people want to control a larger group of people. The only thing redeeming about organized religion is a sense of community – the rest is bull ... be suspect of ANY group that does not welcome free thought and questions. Both organized religion AND government should be smaller ... only then can individuals truly care about one another. Church picnic with 100 people .... nice and happy, thousands of Christians all across Europe with one goal to thwart other ideas ..... Crusades! (and all your other religious nuts on here dont get excited about the Christian bashing ... you are all sheep too!) Keep is small and local people, care about your neighbor ... and if your neighbor feels better believing in fairy tales about God, or Allah, or Jehovah, or Vishnu, or any number of others, let him!

    August 23, 2011 at 10:21 am |
  25. J2P

    I remember Euro countries pricing goods and services in their home currency and the Euro for a few years before releasing the hard currency in order to prepare everyone for the change over and to stabilize prices. What is the plan if Germany, Greece, or some other member leaves the union? There is no plan for an overnight currency changeover. It will be a more severe impact than Lehman if the Euro fails.

    August 24, 2011 at 11:27 pm |
  26. Kacper

    bez ogródek, iż w ostatnim czasie. Dostajemy po tyłku w każdej ważniejszej dyscyplinie i nie jest ważne czy gramy w nożną, siatkówkę lub basketa we wszystkim gonimy ogony i nie możemy w stanie odnieść żadnych znaczących sukcesów, Jest to dołujące i mam już tego dosyć. Brakuje mi aktualnie wielkich nazwisk i postaci w naszym sporcie. Ciekawe kiedy to się zmieni. Przepraszam pesymistyczny, jestem nader niepocieszony. w tej dekadzie.

    September 1, 2011 at 10:42 pm |
  27. Prophetic

    Thanks for taking this opportunity to discuss this, I feel fervently about this and I like learning about this subject. Thanks for sharing this valuable post....


    September 6, 2011 at 12:22 am |
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