Much of the current German-bashing is wild and unfair. But there is one respect in which Germany does bear responsibility for the current crisis. Germany was in the forefront of the countries pushing for the creation of the euro. And yet it is increasingly apparent that creating a single currency, without a single nation behind it, is at the root of the current crisis.
When Chancellor Merkel talks of the need for “political union” in Europe as the long-term solution to the current crisis, she is acknowledging this design flaw. But political union must involve deep losses of national sovereignty. And the current crisis shows that Greeks, Germans and Italians do have one important thing in common – a deep aversion to ceding control of their national budgets.
The result is that the euro is in a dangerous and unstable position. The actions that are being urged on Germany are unreasonable. But Germany’s own solution – structural reform now, political union later – is unworkable.
Amid all these dangers, German officials remain outwardly calm. They shrug off the insults, while continuing to pledge financial aid to southern Europe and to make the case for supply-side reforms as the only long-term solution to the woes of the European periphery.
Behind the scenes, however, some of the brightest minds in the German government have a sense of deep foreboding. Twice in the past year I have found myself sitting next to different senior German officials at a dinner who have proceeded to tell me that the whole single currency was a terrible mistake. Speaking of the euro, one of my companions said: “It seems to me that we have invented a machine from hell that we cannot turn off.” The image was so bleak and Strangelovian that I laughed. But, I am afraid, it’s not really very funny.