Germany, Europe’s Rich Uncle, Is Losing Its Patience
Germany is feeling more and more like the rich uncle in a poor family. Its spendthrift relatives in the euro area are lining up to shake down their wealthier kin for loans that they may never be able to repay.
Actually it's worse than that: Those poor relatives seem to have forgotten that their uncle has already given them a lot of money.
Chancellor Angela Merkel warned in Berlin today that "all resources, all measures, all packages will end up being smoke and mirrors if it becomes clear in the end that they extend beyond Germany's capacity." Agreeing with her was Hans-Werner Sinn, a government adviser, who noted in a New York Times op-ed that Greece has already received the equivalent of 29 Marshall Plans from Germany, which stands to lose more than $1.35 trillion if the euro fails.
But how can a case be made for even more support when Germany's biggest neighbor wants to put his feet up at the age of 60 -- as French President Francois Hollande is planning by reversing the increase in retirement age -- while Germans are expected to keep working until 67 before they get their (steadily declining) state pensions? Let's not even talk about Greek pensions, which until recently had been paid to many dead people.
When financial markets see that peripheral countries are willing to make the structural reforms that Germany did under Chancellor Gerhard Schroeder, the soaring yields that we are seeing today will be a thing of the past. If markets don’t see that acknowledgment, a culture of dependence will only grow in the euro area's southern countries -- and in the northern donor nations, there will be a growing culture of resentment. The euro can't survive in the long term under that arrangement.
"If Germany now opens its wallet without such security, there will be no protective umbrella hanging over Germany anymore," Torsten Krauel wrote in Die Welt today.
In other words: The rich uncle wants to see a better attitude, if not a change in behavior.
(David Henry is a Frankfurt-based editor for Bloomberg View.)