Germany feels pressure of euro crisis
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David Brancaccio: There’s a new sign this morning that the economic powerhouse known as Germany does not stand aloof from the European financial crisis. The credit rating agency Moody’s today downgraded seven German banks, noting their exposure to Europe’s debt problems and slower economic growth. Even second largest one in Germany, Commerzbank, is on the list.
Marketplace’s Stephen Beard is in Berlin today on swing through eurozone countries grappling with the financial mess. Good morning, Stephen.
Stephen Beard: Good morning, David.
Brancaccio: German’s love dispensing austerity, any chance that that’s beginning to change as a prescription for what ails Europe?
Beard: Nein. Germany is still saying no to a lot of the solutions that are being urged upon it by its eurozone partners, such as eurobonds. It’s still saying no to a new idea, the use of European bailout funds to directly prop up the Spanish banks.
Brancaccio: Do Germans not fully appreciate the connection between their general economic success and the fact that some of these troubled countries like Spain, Portugal, Greece, are the ones who buy German goods which helps its success.
Beard: Yes, I think they do, and they also appreciate that the cost of a break up would be enormous in all sorts of ways — loss of markets, but also cause loss of the hundreds of billions of euros Germany has lent to the weaker countries like Spain, Ireland, Italy. Some of the ordinary Germans that I was talking to here in a club last night were talking about their fear that Germany might be blamed for wrecking Europe. After spending more than 60 odd years apologizing and making amends for the mayhem they caused during the second World War. But, it’s a big dilemma, they want the euro to survive, but they don’t want to sign a blank check before the next general election next year.
Brancaccio: But, any sense of movement, in other words, the sense that the EU may now face an existential threat. It could — if Greece falls out of the eurozone — begin to break up, and so now is time for a new kind of thinking about Europe. Are you detecting any of that?
Beard: Well that certainly is in the air, and I think a lot of people that I was talking to last night were referring to George Soros, the fund manager, his observation at the weekend that Europe had only three months to save the euro. There is the possibility there might be some modification, but the Germans, they want to save the euro, but not at any cost.
Brancaccio: Marketplace’s Stephen Beard in Berlin today. Stephen, thank you.
Beard: Thank you, David.
Brancaccio: Stephen is now headed to Spain, where the Prime Minister today said his country is in quote “extreme difficulty” and is explicitly asking for European money to bolster some troubled Spanish banks.