Germany Risks Europe to Make a Point

In a new column I criticize Germany's reckless inflexibility on the euro crisis.

Germany owns the biggest house -- fully insured and with the best fire prevention money can buy -- in a tight cluster of dwellings in the European subdivision. One of those houses caught fire because the owner, despite repeated warnings, refused to fix a broken heater. Conditions are parched, and a hot, dry wind is picking up. The flames have spread, and several other houses are burning.

A rational person might say, "Call the fire department." Germany says, "Hang on. Didn't we tell you this would happen? Let's get clear on how it started before we start spraying water everywhere. You can do a lot of damage that way. Plus, what's the rush? If we put fires out the instant they start, then why would anyone take fire prevention seriously in the first place?

"Also, we'll need a joint insurance policy (watch out for that flaming debris over there) with a tough inspection system to avoid any future free riding.

"Actually, maybe we can use this fire to improve the neighborhood. Honestly, it's the only way to get anything done around here."

Thus I join what the Wall Street Journal calls the Blame It on Berlin chorus:

The chant comes in unison from the debtor nations themselves, the bailout caucus in Brussels, an Obama White House concerned about its re-election, and liberal pundits worried that their welfare-state economic model is under assault. Like the "rich" in America who must pay their "fair share," the Germans are supposed to pay up to save a united Europe.

The reality is that the Germans--along with the Dutch and the Finns--are the rare Europeans who understand that saving the euro requires more than a blank check. It requires a new political commitment to better economic policy. Chancellor Angela Merkel and her cabinet are as euro-centric as the French, but they realize that money alone won't solve Europe's more fundamental debt and growth problem.

That second paragraph makes me wonder whether the Journal thinks a blank check is necessary but shouldn't be written until credible policy commitments are forthcoming, or that it's always a mistake for central banks to print money. Since the Journal believes that most of Europe is incapable of making credible commitments in any case, perhaps it doesn't matter. A Great Depression is prescribed, and the more terrible it is the better it will be for Europe...in the long run.

Maybe a quarter-century of avoidable misery will suffice. But really, whatever it takes. 

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