The seed of failure

The eurozone’s sovereign rescue fund, with its 440-billion-euro dowry, is a significant step toward the much-delayed integration of member states. But it also carries the seed of failure. With the fund’s establishment, the members of the eurozone showed that they had the will to present a united front against the doubts concerning their economies and their common currency. The offer of support, however, comes with the same rules that apply to Greece’s rescue package: Whichever country faces difficulties in borrowing from the markets must commit itself to harsh austerity measures in order to borrow from the rescue fund. Each country, in other words, must imitate Germany’s behavior. The problem, though, is that not everyone can be German (not even Germany itself, as it is one of the 24 EU members whose deficit exceeds the 3 percent of gross domestic product limit set by the Maastricht Treaty). The rescue fund’s target has not been met: The markets are not convinced that it has put an end to fears over some economies and the euro. Perhaps this is because each country still remains responsible for its efforts to reduce its debt – and this at a time when conditions in the EU in general make the task very difficult. The paradox here is that austerity-minded Germany is at the heart of the problem. On the one hand, it has frozen its own workers’ wages for a decade; on the other, its delay in helping to bail out Greece undermined the euro’s value, thus giving German exports greater impetus. This windfall has not been shared with German workers, nor, consequently, with Germany’s partners in the EU. When Germany keeps such a tight rein on its workers, the effort to reduce the cost of labor in other countries is in vain. With lower disposable incomes, Germans not only buy fewer products but they also cut down on trips to other countries. And countries that offer tourism, like ours, usually have little to export in any case. There are two possible solutions: Either the eurozone’s rescue fund will develop into a central borrowing mechanism (leading to the creation of eurobonds), or Germany will have to allow its economy to breathe and, in so doing, give breath to the rest of Europe.

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