Germany, it seems, has neither the will to fix the euro nor the courage to pull the plug on it. Angela Merkel opposes the kind of real reform that might end the crisis for good, but when faced with a choice between the possible break-up of the eurozone and yet another bailout, she has (so far) proved willing to make concessions. The pattern looks set to be repeated with Spain over the weekend.
Most economists agree that Germany has done well out of the euro, its strong economic performance over the last decade owing a lot to artificially low production costs at home and artificially high demand on the eurozone’s periphery. But in his new book, Germany Doesn’t Need the Euro, Thilo Sarrazin, a former member of the executive board of the Bundesbank, dismisses this argument out of hand, claiming instead that Germany has gained nothing from the euro because it hasn’t been growing any faster than northern European countries that stayed out of the single currency.
Sarrazin, a lifelong bureaucrat, shot to fame two years ago with Germany Abolishes Itself, in which he ‘argued’ that Muslim immigrants are putting Germany’s cultural and economic survival at risk. The book has sold close to two million copies. When critics accused Sarrazin of racism, he positioned himself as a victim of political correctness, saying that Germany’s establishment doesn’t dare criticise immigrants because it is so ashamed of the country’s past. As a rationalist who prefers just to look at the facts, he alone is brave enough to speak the truth.
In a similar vein, Sarrazin maintains in his new book that Germany adopted the euro because politicians like Helmut Kohl wanted to ‘alleviate their bad conscience’. Even now, Germans who favour the introduction of eurobonds ‘are propelled by that very German reflex according to which we will only have done penance for the Holocaust and the World War once we have placed all of our own matters, even our money, into European hands’.
As for the danger facing Germany if the euro disintegrates, Sarrazin never even discusses it. He acknowledges that fear of contagion from a Greek default ‘seems to influence what all relevant actors do’, but chooses to ‘leave unanswered the question of whether this fear is well-founded’. If Sarrazin were really the clear-eyed rationalist looking out for Germany’s self-interest that he claims to be, he would consider the possible consequences of the looming demise of the euro. Instead, he spends his time on useless hypotheticals, imagining how much better things would be if Germany had never given up the deutschmark.
Sarrazin’s arguments are far from convincing. But he has, once again, struck a nerve. Many Germans agree that the euro’s introduction was a misguided form of penance for the past. German newspapers rarely discuss the euro’s contribution to German growth, or the effects that a chaotic breakdown of the single currency might have for Germany. There is surprisingly little discussion of how the country’s self-interest might, in the long run, be served. Cheered on by Sarrazin, people instead ask themselves whether, 67 years after the end of the Third Reich, Germany still has a moral obligation to pay for Greece’s profligacy. Once the question is put in those terms, it’s hardly surprising that, according to a recent poll, 60 per cent of Germans want to see Greece leave the eurozone and 79 per cent oppose the introduction of eurobonds.
And yet a paradox remains. Germans are increasingly turning against the compromises that have kept the euro afloat. But, for all that, they don’t want to leave the single currency. Even Sarrazin admits that ‘one neither can nor should simply leave the euro.’ Like most of his countrymen, he is at a loss as to what Germany should do.