Most commentators on the Euro crisis assume that if Germany wished to save the Euro she can do so. Only the failure of the latest German bond auction has caused any doubt to creep in.
Commentators are right to think that Germany is now very powerful within the EU. The Euro lacks a sovereign power, an authority who can make the decisions. Mrs Merkel is the closest it has to that. Mr Sarkozhy is trying to stay alongside her, but in practice the main shots are being called by Germany.
In a way this is all a confidence trick. If you judge German power by votes in the EU, or by her proportion of population and wealth, she is just the largest minority partner amongst many. If you judge her by the popularity of her view that the EU needs to exert much more budgetary discipline over its members, then she should be significantly outvoted by the south led by France, who favour looser money and borrowing more as the answer. If you judge her by her capacity to pay the bills, again you would have a more circumscribed view of her writ. After all, rich West Germany struggled for several years to meet the substantial bills of Eaastern Germany when they rushed headlong into a monetary union on terms very favourable to the East. Many German voters do not feel like repeating that generosity on a continent wide scale. Germany is not rich enough, and does not have enough borrowing power herself, to do to southern Europe what she did to East Germany.
So how has Germany emerged as sovereign elect of Euroland?
The truth is many countries on the continent are frightened of Germany. They huddle together and seek German protection. They accept the lectures on the need for them to be more Germanic, to adopt the Northern Protestant work ethic, to rein in deficits and earn more money and pay more tax. This they see as the necessary price to bind Germany into the new Europe. This is the necessary letting off steam so that Germany in the end accepts the need to transfer more grants, to allow more bond buying, to accept that integration comes at a price to German taxpayers.
The southern petitioner states know that in the end they will get more out than they put in financially. The small northern hard working states that cluster around Germany’s borders know that their economies and societies spill over the common borders. They think they can never be truly independent, so they may as well go along with a scheme which gives them a small voice in common policy making to offset the powerful effect of the German neighbour on their local economies.
As a result the Euro crisis seems to be an agonising political journey for Mrs Merkel and the German Parliament and electorate. It is a race between the markets and Mrs Merkel’s willingness to say Yes to bond buying and Euro printing on a big enough scale to buy them time. So far she shows she wants to get much more integration and budgetary discipline before allowing any more borrowing. Maybe it’s brilliant brinkmanship. Maybe it’s realism. Maybe she now fears the Euro is too dear and too big to save. After all, she knows the true cost of the DM East-West amalgamation, and just how difficult that was for Germany.