In the midst of criticism aimed at Angela Merkel for her apparent unwillingness to put Germany’s full economic weight behind euro rescue, the FT’s Gideon Rachman makes some important points in support of her cautious approach:
First, the chancellor’s critics often fail to acknowledge the real political and legal constraints that she is operating under. Tomorrow, the German constitutional court will rule on the legality of the proposals to increase the fund for bailing out debt-ridden members of the eurozone. Later this month, the German parliament will vote on the issue. It would be both arrogant and foolish for Ms Merkel to assume that she can simply win all these battles, when both German public opinion and many influential voices within the country are deeply opposed to further bail-outs. Similarly, any proposal to create eurobonds would require new EU treaties, which would be very hard to get ratified in Germany – let alone the rest of the eurozone. Those who are calling for ever bolder German actions, regardless of the legal and political difficulties, seem to have little respect for the country’s democracy.
Second, saying that the German chancellor should do “whatever it takes” to save the euro, assumes that we know what it would take. Eurobonds are the latest panacea, recommended by many of the same people who assured us years ago that the euro would be a secure currency. Ms Merkel has no real idea whether they would work. But we do know that expanding the bail-out fund (as will almost certainly happen), or creating eurobonds, would mean piling more and more potential costs and liabilities on to the German taxpayer.
Third, it is not simply vulgar, tabloid prejudice to believe that if more money is funnelled to southern Europe, much of it will be wasted. In countries such as Greece and Italy, basic functions of the state – such as tax collection and the awarding of public contracts – are frequently corrupt. In the past, EU money has actually fostered corruption.
Read the entire article here. In times of crisis the screamers call for simple and immediate solutions to complex problems; Angela Merkel will be well advised to consider her next steps carefully. The critics are right that Europe needs to act and sooner rather than later, but after so many missteps and failed solutions, Europe needs to think more carefully — and Germany’s chancellor must make sure she can carry her country with her once she has chosen her course of action.