Leadership at last?
Germany: From apparent chaos, order may be emerging. In the last few weeks German officials have sounded more positive when mulling about possible long-term solutions to the monetary union's crisis. For now, Berlin keeps insisting on fast fiscal turnaround in over-indebted periphery countries. About the future, Merkel et al are clearly hinting they're open to discussion and that there are no taboos. Germany's partners should do everything they can to support the refreshing new attitude.
On the eve of the euro zone finance ministers meeting, Angela Merkel rightly reiterated her government's opposition to so-called 'euro bonds', too often presented as a panacea for all the zone's woes. The German premier knows that such a pooling of euro debt could only occur once euro members have agreed to abide by strict budgetary discipline and adhere to some kind of fiscal integration. That would be the crowning of a multi-year process. It cannot work as a rushed answer to the current crisis.
But listen closely, and it is clear that the tone in Berlin has changed. Significantly, German government officials now talk about the post-crisis euro zone. The voices are still diverse: the views of europhile Finance Minister Wolfgang Schaueble aren't exactly those of Ursula von der Leyen, the labour minister and rising star of the Christian Democrats. But Merkel herself talks openly about changing the euro zone treaty to reform its governance. It helps that the most rabid opponents of Germany's participation in bailouts - Merkel's own coalition allies from the liberal FDP - have been regularly trounced in elections. Opposition parties supporting the bailouts - Social Democrats and Greens - have gained ground, even though this may have little to do with their euro stance.
Germany's short term policy objectives are clear — isolate the Greek case by whatever means necessary, and support Athens at least until some kind of orderly default is possible. In Merkel's view that shouldn't be before 2013, when the zone's permanent bailout fund becomes operational. But as a new recession threatens, the chancellor should admit that in Greece, as elsewhere, growth is also essential. If Germany wants to confirm the early hopes that it is ready to lead in Europe, it will have to agree on some relaxing of austerity in the periphery, or consent to some stimulus at home.