European Debt Crisis

Germany could rescue the eurozone, but will it?

Stephen Beard Dec 1, 2011

Kai Ryssdal: As long as we’re talking about central banks, here’s one more name to throw out there that you’re going to be hearing more of as the European crisis gets worse: Mario Draghi is the head of the European Central Bank.

Here’s why I bring him up: He said in a speech today that he’d be willing to step up and do more — buy up some of that bad sovereign debt, that is — on one condition. That the 17 governments that use the euro tie themselves together more closely, economically.

Which gets us to Monday and German Chancellor Angela Merkel’s coming trip to Paris. Yet another round of emergency talks about saving the eurozone with French President Nicolas Sarkozy. Merkel’s been taking her time deciding whether and how much she’ll spend to rescue the euro. In fact, there’s was a great quote the other day from the Polish foreign minister. Radek Sikorski’s his name. “I will probably be the first Polish Foreign Minister in history to say this,” he said. “But here it is: I fear German power less than I am beginning to fear its inactivity.”

We asked Marketplace’s Stephen Beard to assess the mood in the German capital.

Stephen Beard: In order to explain this complicated mess, the media have resorted to metaphor: The euro is a ship, holed below the water line, and sinking as the crew bickers over who should bail it out. Or the euro is a train — and some of its carriages have gone off the rails.

But among the commuters we spoke to at the Grand Central Station in Berlin this morning, there seemed little sense of an impending euro disaster. Although Martin Pluta was a little worried about disunity in Europe.

Martin Pluta: Yeah, I do have some concerns because I think the euro is very important for Europe to be united.

And Beate Gracher, a music teacher, was not happy about Europe looking to Germany to solve the crisis.

Beate Gracher: I’m angry about the future. Why every time, the Germans? And so we have the fear that they all want our money.

They do want your money. Germany is the only country in the eurozone with deep enough pockets to save the euro. And it does need saving.

Time for another metaphor: Ferdinand Fichtner of the DIW think tank in Berlin says the euro has had a heart attack.

Ferdinand Fichtner: Clearly, Europe is on the operating table and needs an urgent surgery.

But he says Dr. Merkel and her team are not wielding the scalpel, but drawing up a diet and program of exercise so the patient doesn’t have a future attack.

Fichtner: Clearly, Merkel is focusing on the future structure and the future workings of the euro area.

She wants her European partners to sign up to strictly binding limits on the amount of debt they can run up in future. They want instant solutions. They’re not going to get them from Merkel, says commentator Heinz Schulte.

Heinz Schulte: What she will not do, it seems to me, is to give the European Central Bank carte blanche to print money. That would be against the German grain, I’m sure of it.

Printing money equals hyper-inflation, equals the turmoil that led to Hitler. That’s the grim equation from German history. Merkel’s apparent dithering reflects her voters’ reluctance, especially when it comes to putting more money into Germany’s southern neighbors. The country is already committed to lending them $280 billion.

Constanze Stelzenmueller is with the German Marshall Fund of the U.S.

Constanze Stelzenmueller: I think there is a sense right now that we keep being asked to pay and pay and pay.

But, she concedes, Merkel’s inaction and the market’s turbulence are raising anxiety levels among policymakers in Berlin.

Stelzenmueller: You can sense the tension in this town, you can sense a fear that people might not get their act together in time for this. And the time factor’s crucial, because clearly the markets are very impatient.

As a schoolgirl — so the story goes — Angela Merkel once spent an entire swimming lesson perched on a diving board. Only at the end of the lesson did she finally take the plunge. Ferdinand Fichtner worries now about a repeat performance.

Fichtner: There is probably a danger that she might jump in too late.

And if she does, the euro could be sunk — and not metaphorically.

I’m Stephen Beard for Marketplace.

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