Tag Archives: Germany

The wrong battle

Illustration in linocut by Manos Symeonakis

“There is no Greek-German war,” government spokesman Giorgos Petalotis said last week. “Greece and Germany are not on collision course,” said Foreign Minister Dimitris Droutsas. All these statements can only mean one thing: Greece and Germany are very much at loggerheads. But their dispute is not just a bilateral squabble; at its heart it’s about divergent views on how to respond to the crisis threatening the euro and, beyond that, on the very purpose of the European Union.

The frantic attempts by the government to play down any rift between Athens and Berlin came after Greek Prime Minister George Papandreou decided on November 15 to dust himself off, stand on the ruins of the Greek economy and hit back at German Chancellor Angela Merkel with a rebellious passion. Speaking in Paris, Papandreou accused Merkel of driving up bond yields for weaker eurozone members by insisting that private investors should foot part of the bill for a permanent mechanism to support countries with failing economies, like Greece’s. “This could create a self-fulfilling prophecy,” said Papandreou. “This could break backs, this could force some economies into bankruptcy.”

On the face of it, there seems little wrong with Merkel’s insistence that private bondholders should accept losses, or a “haircut,” on their investment as part of a debt crisis mechanism to be adopted by 2013. Most Europeans would accept that this would create a fairer system although, clearly, German taxpayers would benefit the most as they’re the ones who would be called on more often to bail out failing eurozone members. But the self-serving element to Merkel’s position is not what should be of most concern to Europeans. Instead, it’s the way Berlin has tried to steamroller other EU countries into accepting the inclusion of the “haircut” clause ahead of a decisive EU leaders summit in Brussels next month. It’s this lack of consultation and the absence of consideration for struggling eurozone members that is undermining the Union.

Papandreou argued that making such a big fuss about investors having to pay their share simply gave jumpy bondholders a seriously aggravated case of the jitters, pushing up the yields on government bonds for Ireland, Portugal and Spain to dangerous levels. Few EU leaders backed Papandreou openly but there is great concern about Germany’s stubbornness. “When the history of the eurozone is written, last month’s German-driven EU summit agreement to devise a crisis resolution mechanism for countries to service their debts may well be cited as the event that pushed Ireland over a cliff,” Bloxham, Ireland’s oldest stocbrockers, said last week, a few days before Dublin turned to the EU and the International Monetary Fund for emergency loans.

In Germany, though, there is a different view. “If Merkel were to abandon her plans, then it would be paradise for investors and weak governments,” wrote the Suddeutsche Zeitung newspaper last week. “The speculators could charge higher interests on Irish or Greek bonds without any risk of losses. And the Greeks could continue with their record indebtedness because they would have no more pressure from the financial markets and in an emergency would be rescued by their euro partners.” However, this ignores that when Greece tries to go back to the international bond markets in 2013, its borrowing costs will be pushed up anyway, as investors will be wary of having to take a haircut should Athens have to revert to the permanent EU mechanism for further loans.

The Greco-German dispute is symptomatic of the differing views emerging within the EU about how to combat the debt crisis. There is a tendency for the EU to speak with two voices and to pull in two different directions. “The euro, which was supposed to make European integration irreversible, could become its undertaker,” wrote the Frankfurter Allgemeine Zeitung daily last week. Every day the debt crisis gnaws away at the EU’s confidence, making the Union seem an exhausted shadow of its former sprightly self. This dissipation of energy and will is leading to division and, whether through bad luck or design, Merkel is at the forefront of creating ever-deeper rifts.

Speaking at a rally of her Christian Democratic Union (CDU) in Karlsruhe on November 15, the same day that Papandreou challenged her scheme for private investors, Merkel said her predecessor as chancellor, Social Democrat Gerhard Schroeder and his Finance Minister Hans Eichel had blundered when they allowed Greece to join the eurozone. “In 2000, Schroeder and Eichel couldn’t let Greece join the euro fast enough and they ignored all the warnings,” she said. “It was a political decision… political decisions are important but those which ignore the facts are irresponsible.”

It’s now obvious that Greece was not ready in 2000 to stick to the single currency’s fiscal guidelines, as prescribed by Germany. It’s also clear that allowing Greece into the eurozone was a political decision — one aimed at giving the nascent single currency numerical, if not necessarily economic strength, but also the opportunity to encourage economic reform and German-style efficiency in a sluggish European state. A decade ago, it was a convenient political decision for Germany — Greece, after all, became another market in the eurozone for its exports — but now it’s a terrible inconvenience for Berlin. But that’s the thing about political decisions: You take a risk. Sometimes you ignore the facts because you have a conviction that something greater is at stake, even if the numbers don’t back you up.

Merkel might consider, for instance, that the Marshall Plan, which ensured Germany’s post-war reconstruction and helped it become the economic powerhouse it is today, was a political decision. The United States, which led the effort, could have decided that paying to help rebuild Germany did not make economic sense but Washington chose to look at the bigger picture — the opportunity to fight “hunger, poverty, desperation and chaos” as US Secretary of State George C. Marshall said when he unveiled his plan in June 1947. Using words that are eerily relevant to today’s Europe, Marshall said: “The United States should do whatever it is able to do to assist in the return of normal economic health in the world, without which there can be no political stability and no assured peace.” Peace in Europe is not under threat in 2010 but the EU’s faltering economic health is putting its unity at risk.

While leaders argue over bond yields, haircuts, bailouts, deficit and debt, one very important factor is being overlooked. As was the case in the Europe of 1947 before the Marshall Plan, it’s the people that are suffering. They are the ones that pay the cost of failed economic policies and soaring bond yields — people who have fulfilled the wishes of politicians and bankers by mortgaging their futures to buy houses and cars and who believed the euro would bring the permanent stability they were promised. This is why unity must be restored.

Somewhere between Papandreou’s rebelliousness and Merkel’s intransigence, we’ve forgotten that the EU and its institutions were created to improve people’s lives. Many of these people are now losing their jobs, homes and hope. That’s why, even though Greece and Germany may not be at war, their dispute is confirmation that Europe is fighting battle, but the wrong one.

This commentary was written by Nick Malkoutzis and was published in Athens Plus on November 26, 2010.

No countries for old ideas

Illustration in linocut by Manos Symeonakis

Brussels – There’s a homeless man who sits with his back against the wall of Gare du Nord railway station in Brussels and begs for money. He chooses a spot near the station’s side exit, where few people pass. It also rains a lot in the Belgian capital, so he doesn’t look like a happy man. But by the end of Friday, when European Union leaders will have finished negotiating on new, stricter budget rules for member states just a couple of kilometers from where the beggar sits, they could make him look like the happiest guy in town.

Such has been the intensity of disagreement over how to take economic governance up a notch in the 27-nation bloc that there will be a lot of fraught faces in Brussels this week. Of course, if a deal is reached, the smiles will break out – until people start questioning the implications of what has been agreed.

The negotiations leading up to the summit, which began on Thursday, have been overshadowed by events on October 17: Just as a task force of EU finance ministers led by European Council President Herman Van Rompuy and assisted by the head of the European Central Bank, Jean-Claude Trichet, was putting the finishing touches to proposals designed to stop member states like Greece from overspending, Germany and France decided they would save everyone the trouble and decide on the final scheme on their behalf.

The task force had come up with a system of issuing sanctions against countries that violate the 3 percent of gross domestic product (GDP) limit on their public deficits and the 60 percent of GDP limit on debt, as set out in the EU’s Stability and Growth Pact. Countries that fail to conform would face the prospect of being fined. Both the ECB and the European Monetary Affairs Commissioner Olli Rehn had wanted this process to be semi-automatic, in other words not to be open to political interpretation or manipulation.

Before the mechanism – which for now will only apply to countries that use the euro – was even properly conceived, German Chancellor Angela Merkel and French President Nicolas Sarkozy announced they had agreed on a different method. In a two-way compromise, Merkel agreed that a qualified majority of eurozone governments would be required to start disciplinary action (including political sanctions such as withdrawal of a state’s voting rights) and that a permanent emergency fund should be created for members that can’t balance their books, while Sarkozy conceded that any changes to budget rules should be included in an amended EU treaty.

The Franco-German power play prompted dismay – Trichet insisted a footnote be added to the final version of the proposals stating that he did not agree with all of them – and horror – Luxembourg’s Foreign Minister Jean Asselborn accused the French and Germans of dragging the EU back into the 19th century with the idea of removing members’ voting rights: “You are threatening states, threatening peoples, humiliating them.”

Rehn, meanwhile, insisted in Brussels on Tuesday that he would push up to the last minute for the sanctions process to be free of political intervention and disagreed openly with the prospect of denying offending members the right to vote, which he said is “not in line with the idea of an ever-closer Union.”

The Finn was speaking at the launch of a new system for monitoring the performance of eurozone economies. Dubbed the Euro Monitor 2010, the report compiled by the Lisbon Council think-tank and the Allianz financial services provider uses a range of 15 indicators in four key categories – fiscal sustainability; competitiveness and domestic demand; jobs, productivity and resource efficiency; and private and foreign debt – to evaluate performance rather than just fiscal measurements. The idea is that the Euro Monitor would provide a better early warning system of failing economies and would be a more comprehensive way of monitoring and encouraging balanced growth in the member states.

Given that he’s had more numbers thrown at him this year than a bingo hall announcer, perhaps Rehn, who expressed his support for such an analytical tool, could be excused for missing the irony of the occasion. He may well favor a more rounded approach to assessing economic progress but the measures due to be approved this week use purely fiscal indicators as their totem poles. Even though the EU is more acutely aware of its failings thanks to Greece’s spectacular implosion, the Union is about to commit to a form of “reinforced economic governance” that is predicated on the same terms that have underpinned eurozone economies for the last decade and which failed to prevent the current mess in which many member states find themselves. It uses the same debt and deficit limits that were consistently violated, not only by rulebreaker Greece but by rulemakers France and Germany as well.

Also, the proposed mechanism pounces on failure rather than encouraging success. It threatens to punish member states that fail to comply with somewhat arbitrary fiscal limits but does not suggest how they can drive their economies to stay clear of trouble. It proposes sanctions when there is no evidence that financial penalties bring states into line. Greece, for example, was the first EU country to ever be fined for an offense – for the operation of an illegal trash dump on Crete – in July 2000. It spent the following 10 years amassing fines for breaching EU environmental legislation. At the end of the decade, Greece still had one of the worst environmental records in the Union. It had neither reformed nor conformed as a result of the fines.

There is a deeper problem, though, with the proposals. They show the EU to be running short of ideas at a most crucial juncture: When countries across Europe, from Greece to Britain and Ireland to Portugal, are taking the austerity hatchet to their troubled economies, there seems to be no attempt to develop a more sophisticated and nuanced economic model to deal with the challenges of the 21st century. Europe appears to have accepted the cost-cutting, tax-hiking philosophy of the International Monetary Fund without question.

This undermines the Union much more than any disagreements or backroom politics. The EU was once about breaking through the waves; its budget proposals are only about staying afloat. The measures reek of bleakness and there is nothing there to inspire the Union’s 500 million inhabitants. As John Rentoul, a commentator for the British daily The Independent, wrote in the wake of his government’s drastic spending cuts: “This isn’t about economics – as ever, that can be argued either way – it is about a strategy for the country.” Or in this case, the Union, and there doesn’t seem to be one.

Whatever is finally agreed this week, EU leaders will not be able to escape the fact that they are talking one language — that of debt, deficit, austerity, limits and sanctions – when many of their people would like to hear them speak another – that of jobs, security, prospects, fairness and quality of life. Even the homeless man in the street would be able to tell them that avoiding financial bankruptcy does not prevent you from being morally bankrupt, balancing your budget does not mean you have an equal society and reducing your deficit does not preclude you from being short of ideas.

This commentary was written by Nick Malkoutzis and was published in Athens Plus on October 29, 2010.

The World Cup: a measure of life

Illustration by Manos Symeonakis

“I have measured out my life with coffee spoons,” wrote T.S. Eliot in one of his poems. I know exactly what he means. I have measured out my life with cups, World Cups.

The significant moments in my life – meeting special people, saying goodbye to others, obtaining academic qualifications and reaching career milestones – all seem to have coincided with international football’s top tournament every four years. Obviously, things have happened in between World Cups but my recollection of them is a little blurry – like vaguely remembering the name of someone you met at a party while on your way to greet another person you actually wanted to talk to.

Every four years, I become the object of ridicule as I read up on the participating teams like a scientist preparing for a job interview at NASA, check the TV schedule with the fastidiousness of a railway stationmaster and spread out my World Cup wall chart like a general preparing for battle. I go through this ritual each time because I have always regarded the World Cup as a unique learning experience. “All that I know most surely about morality and obligations, I owe to football,” wrote Albert Camus. To paraphrase him, most of the important things I have learnt about life, I owe to the World Cup.

My first memories are of the 1982 tournament in Spain, when I would rush home from school during gloomy English summer afternoons to watch the teams play in the brilliant Iberian sunshine. The first incident that made an impression on me was in the Kuwait v France group game when the French, already 3-1 up, scored a fourth goal. Bizarrely, the Kuwait defenders stood still, allowing the French to hit the back of the net. They immediately remonstrated with the referee, claiming they had heard him blow the whistle during the build up to the goal. A sheikh who was president of the Kuwaiti federation stormed onto the pitch and demanded that the goal be cancelled. The Russian referee eventually caved in. I watched agog – this wasn’t the World Cup, this was my playground game being broadcast on TV. It was at that point that the tournament taught me my first lesson: there are no children and adults in this world, just small children and bigger ones.

Spain 1982 was also my first experience of Brazilian brilliance. The 1982 team is regarded by some as the most beautiful side never to have won the tournament. Echoing the remarkable Brazilian World Cup-winning team of 1970 – generally deemed to be the most entertaining to have won the trophy – the Brazil of 1982 played with panache and abandon, radiating optimism. Watching their yellow shirts dart across the screen felt like liquid sunshine was flooding into the room. Years later, I would read a book written by Garry Jenkins about Brazil’s 1970 victory, and his memories of watching the team on small colour TV in a tiny Welsh Village. “All coffee browns and ebony blacks, cobalt blues and canary yellows, their players and their playing came in shades I had never seen before. They have occupied a sun-kissed corner of my mind ever since,” he wrote in “The Beautiful Team.” I knew exactly what he meant.

The Brazil of 1982 would succumb to the eventual winners, Italy, in an epic game that finished 3-2. This match provided me with two more useful lessons. Firstly, Brazil’s defeat at the hands of the less imaginative but much more functional Italians made it clear that the most worthy are not always rewarded. Secondly, I came to realise that no boundaries, be they geographical, social or emotional, can contain the unifying power of sport. We were driving through what was then Yugoslavia when the Italians were taking on Brazil. We stopped at a village for something to eat but found the streets completely deserted. Like extras in a spaghetti western, we searched for signs of life before stumbling on the locals ensconced in cafe, watching the game together in absolute fascination. Ten years later, this same group of people would be torn apart by ethnic war.

In 1986, the football world gathered in Mexico and I was given special parental dispensation to stay up to watch the games being played in exotic-sounding places like Guadalajara and the Azteca Stadium in Mexico City. Two memories stand out from this summer – the first is recreating scenes from the World Cup on the football pitch with my schoolmates. We were all given names of the players we resembled and lunch breaks immediately became flights of fantasy in the afternoon sun. The other memory is more of a childhood trauma, which involved sitting on an Athens balcony on a hot summer night and watching Argentinean midfield genius Diego Maradona punch the ball into the net to set his team on the way to knocking my beloved England out of the tournament. Aged 11, I was in a complete state of shock. I did not for a second believe that authorities would let this stand and was convinced that the next day football’s world governing body, FIFA, would order the game to be replayed. When this didn’t happen, I started a petition. I only ever got around to collecting three signatures – two of them were my parents’ and the other was my grandmother’s. She had no idea who this dastardly Maradona chap was but he had clearly upset her grandson and that was all the reason she needed to sign on the dotted line.

My indignation at Maradona’s cheating blinded me to the sublime nature of his second goal against England that day, as he danced passed player after player to score what many believe is the best World Cup finals goal. Years later I would be able to marvel at how his balance and strength were for a few seconds in complete harmony with his improvisation and creativity. But in the summer of 1986, I was too busy coming to terms with the fact that cheaters sometimes get away with it and that fairness can prove as elusive in life as a stocky man from the slums of Buenos Aires weaving his way towards goal.

In Italy four years later, there was more anguish for England as they were eliminated by West Germany in the semi-finals. The match became synonymous with the tears of young English midfielder Paul Gascoigne, who was inconsolable after England’s defeat. I shared in his tearful dejection. The obliviousness of youth meant that I had never considered defeat was a possibility for the team I was supporting. Coping with its reality proved a test of my emotions. Coming a few months after my mother’s death, England’s loss revealed to me that pain and disappointment don’t come in neat packages but that they can crash in on you like waves, one after another, and you either stand up to them or face being swept away. Gascoigne, known simply as “Gazza” in England, never fully recovered from his disappointment in Turin in 1990. Although his career lasted almost another decade, it was blighted by injury, controversy and drink and drug problems. Gascoigne is still struggling with his demons in retirement and is a stark example of how fame can destroy people as well as create stars.

It was Gazza’s tears that first made me aware of the fact that I was not the only one experiencing moments of clarity thanks to the World Cup. It was also happening on a collective level. England’s unlikely run to the semi-final in 1990 and its unjust defeat to the Germans prompted a rare awakening of people’s conscience back home. It led to England increasingly trying to establish and project its identity through sport. More importantly though, the English had recast themselves in the role of gallant losers who wanted to be loved rather than aloof snobs. The game against the West Germans inspired a play, a film, a documentary and a host of books suggesting that England had emerged from the embarrassment of the hooligan- and Thatcherism-filled 80s with a new creative, positive energy.

At this point, I began to join the dots and connect the significance of what was happening on the field of play with what was taking place beyond the confines of football. This link was described most eloquently by journalist Arthur Hopcraft in his 1968 book “The Football Man”. “It [football] has more significance to the national character than theatre has,” he wrote. “What happens on the football field matters, not in the way food matters but as poetry does to some people – the way we play the game, organise it and reward it reflects the kind of community we are.”

My first visit to a World Cup was in 1998 when France hosted the tournament and the local team’s victory was certainly taken as a reflection of the successful integration of different ethnicities and nationalities in the country’s social fabric. Such powerful symbols are too important for politicians to ignore and it was at this tournament that I became acutely aware of how desperate leaders are to bask in sport’s glory. French President Jacques Chirac – who along the country’s other politicians had been largely oblivious to the tournament until France started to do well – attended the final with a France scarf awkwardly draped over his shoulders, looking as if he had mistakenly put on one of his wife’s shawls for the evening. If the Brazilian strikers had displayed the same opportunism against France in the final, he would have little to celebrate and no opinion poll “bounce” to enjoy after the match.

The enthusiasm displayed in Germany eight years later was much more genuine. I experienced first-hand a nation that embraced the event – not just its own team – and used the World Cup as an opportunity to break down stereotypes. This attitude was reflected in the country’s national team, which played with a freedom and attacking spirit that was untypical of its predecessors as it progressed to the semi-finals, where it was beaten by Italy. The Italians defeated France in the final, where it’s captain and the epitome of racial equilibrium, Zinedine Zidane, was sent off for headbutting an opponent.

Zidane’s dismissal proved to be the moment when French harmony began to disintegrate. Just as the team imploded at this year’s World Cup amid a bitter exchange of insults between players and coaching staff, so France appears a society ill at ease with itself and in search of a collective identity.

Germany is another country which is going through turmoil – political rather than social. Once the spiritual and physical driving force of the European Union, Germany is now suffering a crisis of conscience. So, it was no surprise to see Chancellor Angela Merkel in the stands of South Africa’s stadiums, cheering on her country’s young, effervescent team, hoping some of the positivity would rub off. In their progress to the semifinal, their determination to attack games rather than to rely on the all-out defensive tactics that have been popular with many teams helped to dispel the image of Germans as cautious conservatives who could not inspire others to admire or respect them. “In the history of German football, there have been many successes but they were expected, hard-fought and enforced. Achieved with limited skills, with accomplished destroyers who made life difficult for the star opponents, with iron feet, iron calves and an iron will,” wrote Die Welt daily after Germany’s historic 4-1 win over England in the second round. “Often our national team was strangely alien to us. We wanted to love them but we were unable to. They often found their way into the semi-finals and finals but rarely into the hearts of fans.”

The performance of individual teams apart, South Africa’s World Cup has taken football’s significance to another level. First of all, there was an opportunity for Africans to come together, especially when Ghana were the continent’s last remaining representatives in the competition. “Ghana’s exploits, and the team’s epically tragic exit, arguably did more for grassroots African unity in a few days than the African Union did over decades,” wrote Simon Tisdall in The Guardian on July 7. “It also re-focused attention on the lack of African coaches and under-investment in the sport and the young people that play it.” FIFA certainly wanted to make this last aspect – offering young South Africans an opportunity to learn football – to be a lasting legacy of this World Cup, The efforts that have been made so far have been laudable. Whether they will have a lasting impact remains to be seen. However, one of this tournament’s greatest legacies will be something that FIFA could never plan. It’s the fact that thousands of Europeans, Asians, North and South Americans have had first-hand experience of the huge divide in living standards that exist in South Africa and of the barriers that still exist in this beautiful country. It’s the thousands of foreigners who have visited Robben Island over the last few weeks and have been reminded or made aware of the damage that hate can wreak. It’s the fact that outsiders have had an opportunity to contribute to South Africa’s future, like the group of England fans who built an orphanage in the Valley of a Thousand Hills. The World Cup won’t make South Africa a fair or equal society but if it can help push it in that direction, then it’s been a worthwhile effort.

So, now we look to Sunday’s final between the Netherlands and Spain, which will no doubt also provide plenty to absorb. The winners will see at as confirmation that their country is doing something right while the losers will hold an inquest into what they are doing wrong. For the rest of us, there will be something very tangible to take away from the game – it will be less than 1,460 days until the next tournament begins in Brazil, when we can all attempt to measure out our lives, individually or collectively, again.

Nick Malkoutzis

Life, but not as we know it

Illustration by Manos Symeonakis

It’s a scene that is becoming very familiar to people across Europe: A newly elected leader addresses his nation and blames the previous government for its “total irresponsibility” which has left a “terrible legacy” of seriously compromised public finances, which are in an “even worse state than we thought” and which will require “painful” but absolutely necessary cuts. Earlier this year, it was George Papandreou delivering this stark message — British Prime Minister David Cameron reprised the role this week.

A few days earlier, the scene had been repeated in Hungary, which, like Greece, has borrowed money from the European Union and the International Monetary Fund. The claims by government officials in Budapest that the previous administration had disguised the poor state of the local economy and that the public deficit would be bigger than expected, sent the type of shockwaves across the continent and international financial markets that only Athens had been capable of until recently, as concerns about a Hungarian default stoked another round of fear about the future of the euro and the EU.

Apart from Greece, Britain and Hungary, Ireland, Spain, Portugal, France and Italy have all had to take steps – albeit less austere than the Greek ones – to rescue their public finances. Even Germany, Europe’s economic powerhouse and the metronome for stability within the Union, announced this week that it’s seeking to make more than 80 billion euros in cuts over the next few years. Until now, there has been unease about European countries being too disparate in economic terms but, ironically, the current debt crisis has suddenly given them common points of reference. It’s causing people across the continent to ask two key questions: “Why are we in this position?” and “How do we get out of it?”

There are two aspects to why so many European countries find themselves in a mess: the economic and the political. In terms of the economic failings, the EU simply found itself unprepared for the consequences of the financial crisis that began in the United States two years ago. A failure to reduce debt when European economies were booming meant that the onset of recession — which also coincided with the use of public money to prop up the private sector, especially banks — has saddled many countries with unprecedented debt and exposed an Achilles’ heel that speculators can exploit.

“The banking crisis has mutated into a sovereign debt crisis; the weakest members of the eurozone are targeted because the euro is a comparatively new currency lacking sufficiently strong institutional foundations, and because markets doubt the ability of the weaker countries to manage their debt problems,” the editorial director or the European Council on Foreign Relations, Thomas Klau, told Athens Plus.

This implies that the real roots of the crisis lie in the political arena. Just as governments across Europe have tried to mask the real size of the problem, often leaving it for the next administration to deal with, so for a number of years, the politicians of various ideological persuasions that held power found it easier to go with the flow rather than develop a long-term plan. Instead of making hay while the sun shone, they simply sat back and soaked up the rays. What happened in Greece, more than anywhere else, has driven this point home. “Greece stands as a warning of what happens to countries that lose their credibility or whose governments pretend that difficult decisions can somehow be avoided,” Cameron said this week.

There are few who would argue with him. “I think that the political inadequacies are most pronounced in the Greek case and to a lesser extent in Portugal,” Professor Iain Begg of the European Institute at the London School of Economics told Athens Plus. “In the other cases, it is more that – as with banks like Northern Rock or Lehman Brothers – the business model is no longer as viable as it used to be and that has fueled market scepticism. Let’s not forget that Spain actually scored pretty well in relation to the fiscal rules, even if, with hindsight, we can now say that it ought to have been running a budget surplus.”

These inadequacies, which an unnamed German official described to the International Herald Tribune’s John Vinocur as “a decade wasted through a lack of frankness and realism,” have left many European countries, the single currency and millions of people at the mercy of markets, which have now become the sole judges of economic policy. The response to this situation, therefore, must be one that is deeply political and carries serious conviction. “Because EU members were caught misrepresenting their finances with the passive acceptance of France and Germany for a decade, no response or solution that is based on a statement of intention rather than a legally binding undertaking is likely to lead the markets away from their hair-trigger surveillance of the euro and Europe’s solidity,” wrote Vinocur in the IHT this week.

The political solution to this problem must first come at an individual state level. “In the UK, the problem, I suspect will prove to be reasonably easy to manage but in Greece, the whole approach to the public sector needs radical change,” says Begg. “In Spain and Italy, labor market and welfare reforms will require political courage and leadership.”

This decisiveness then has to be replicated on a collective level as well. The IMF said as much in its report on the European debt crisis this week. “Crisis management is not an alternative to corrective policy actions and fundamental reforms needed to reinforce the foundation of the European Monetary Union,” the Washington-based fund said in the wake of European finance ministers agreeing to commit 440 billion euros to a rescue fund for debt-ridden EU members, which the IMF will also participate in.

In practical terms, it means that common policies and instruments must be devised along with checks that it is in everyone’s interest to adhere to. “What this crisis has shown is that the euro countries must accept a much stronger degree of shared sovereignty over their public finances and economic policy to ensure the long-term survival of their currency,” says Klau. “A monetary union needs a political union, as the Bundesbank wrote 20 years ago.”

Instilling this level of togetherness is going to be a massive challenge. If controling their debt in the midst of a recession appears an elusive goal for EU countries, then getting them to work in harmony toward this will seem like trying to pin down a greased greyhound during a torrential rainstorm. Already this week, Britain has rejected the notion of presenting its national budget to Brussels before submitting it to its own Parliament. The newness of the debt crisis means that political leadership and consensus will take some time to emerge but recent history indicates our futures depend on it eventually shining through.

“The decisions we make will affect every single person in our country, and the effects of these decisions will stay with us for years and decades to come,” Cameron told his audience this week as his government began reviewing its planned spending cuts. “How we deal with these things will affect our economy, our society, indeed our whole way of life,” he added. The Conservative Party leader will probably never utter more accurate words during his premiership. In fact, our way of life is already being transformed. What it changes into will depend on the political decisions taken over the next few months.

This commentary was written by Nick Malkoutzis and appeared in Athens Plus on June 11.

Germany, a cold case

Dortmund – It used to be said that if the United States sneezed then Mexico caught a cold but in the German heartland of North Rhine-Westphalia, you get the impression that as far as the European family is concerned there has been a reversal in the relationship between the economic superpower and the lesser associate and that Greece’s sniffles are causing the Germans a big headache.

There was a state election here on May 9 that Chancellor Angela Merkel’s party lost. Her reluctance earlier this year to commit quickly to a rescue package for Greece was partly down to the fact that she didn’t want the coalition government – made up of her center-right Christian Democrats (CDU), its Bavarian sister party the Christian Social Union (CSU) and the pro-business Free Democrats (FDP) – to suffer a defeat in North Rhine-Westphalia and lose its majority in the Bundesrat, German Parliament’s second legislative chamber. But this is not turning out to be Merkel’s year and that’s exactly what happened.

Although there is no conclusive evidence to prove that the Greek crisis was the decisive factor in her party’s defeat, it did appear to have some impact. Pollsters Infratest dimap found that the Greek crisis was “important” or “very important” to 52 percent of voters. On the other hand, 47 percent said it wasn’t important. The actual election result was equally ambiguous as it didn’t leave the opposition Social Democrats in a position to form a center-left coalition to govern the state and negotiations about who will do so are still continuing. But maybe it’s in this absence of a clear cut message that one can find the true effect of the Greek crisis. Above all, it seems to have disorientated the Germans –  Merkel and her citizens appear to be confused about what kind of Europe they want and what role Germany should play within it.

Merkel had wanted to bring a “culture of stability” to the European Union but her actions have been more schizophrenic than stable over the past few months. First she procrastinated over whether to come to Greece’s aid then she allowed French President Nicolas Sarkozy to play the lead role in constructing an unprecedented 750-billion-euro EU support framework for debt-ridden countries. Now, Merkel has sprung into action and over the last few days has called for a global levy on banks and the creation of a new European credit rating agency, as Germany unilaterally banned naked short selling of eurozone government bonds and other securities.

This has all played out against the backdrop of a divided domestic opinion – 52 percent of Germans support the Greek aid package and 43 percent are against it according to a poll by Forsa for Stern magazine on May 5 and 6. In North Rhine-Westphalia, Germany’s richest and most populous state, it’s easy to see why Greece’s debt and borrowing problems seem like a world removed. Whereas Athens has been faced with interest rates of more than 7 percent above the German bund rate, North Rhine Westphalia is paying just 0.35 percent more than Berlin to borrow money. Equally, committing funds to bail out Greece galls some Germans when their government has agonized over whether to prop up Opel, the local subsidiary of General Motors, and the Karstadt department store group. Maybe it’s no surprise that Germans are split over the way forward.

There is a feeling, however, that this indecision starts with Merkel. “Her whole governing style in domestic politics since she became chancellor has been one of hesitation, cowardice, not taking a stand, not doing what a leader should do,” Florian Hassel, a business reporter for Die Welt daily told Athens Plus.

“Her lack of solidarity with Europe this year has made many Germans feel extremely uncomfortable,” Daryl Lindsey, the editor of the online version of German weekly magazine Der Spiegel told Athens Plus. “The idea of Germany being isolated in Europe is horrifying to most Germans because the country’s strong role in fostering European integration is a large part of what has created the modern Germany which has been able to move forward from its difficult history.”

Having a flummoxed Germany as the EU is facing a cascade of new challenges could be a disaster for the Union, especially when the problems the euro has run into mean that more, not less, cooperation is needed. “It has become apparent that the euro was a fair-weather construction from the beginning and that you cannot have an economic union in the long run without a political one,” says Hassel. “But as few Europeans are willing to move forward with a political union, we have a crisis on our hands which will last a long time.”

However there is some hope that Germany will snap out of its stupor. The swift agreement between EU leaders earlier this month to put together the 750-billion-euro guarantee was “close to a miracle,” according to Lyndsey who thinks it’s a sign that Germany could yet be a champion of European solidarity. “It actually shows the extent to which European unity already exists,” he says. “If Merkel is ready to state that the threat to the euro represents an existential threat to the European Union, then I think she and the Germans are ready to fight to save it.”

Germany’s participation in the so-called “shock and awe” package, which may reach some 150 billion euros, was approved by the country’s Parliament last week. It could prove a pivotal moment for Germany, which has profited so much from membership of the EU and eurozone, which are captive markets for its exports, just at his from its business, banking and defense dealings with Greece. “We’re doing this in our best national interests… the common European currency has been a huge benefit to Germany,” said Finance Minister Wolfgang Schaeuble before last week’s aid vote. “Without the euro, we would have a much weaker economy, a much weaker Germany.”

It’s clear, though, that much more than the future of the euro and the continent’s economic stability is at stake. The crisis is not just an economic one, at its root it is political. The real question being asked of EU countries is not what fiscal policies they should follow but how closely coordinated and managed they should be. In other words, how much solidarity is enough and how much integration is too much? “It isn’t just about a currency but about the European project per se,” Germany’s former Foreign Minister Joschka Fischer told Der Spiegel in an interview this week. “It’s about the issue of whether Europe is strong enough and has the common desire to defend its project against external attacks, in this case, by speculators.”

With the stakes so high, we may see a much more decisive Angela Merkel from now on, suggests Lindsey. “There has always been a feeling in Germany that Merkel’s background as a scientist is too often reflected in her political decision-making. Logic and reason are comforting in situations that permit slowly calculated decisions, but that scientific thinking appears to be incompatible with fast moving markets.” He believes the criticism she has received for dithering over key European issues “is likely to be highly motivating for the German chancellor.” He also thinks public opinion will gradually swing behind efforts to bolster the union. “The money required to save the euro will directly affect German quality of life, but people are slowly coming to terms with this now and they know that the alternative would be far worse.”

In the meantime, we wait to see if Germany has contracted a common cold that it will soon recover from or whether it has a case of pneumonia that could prove deadly, not just for the patient but for the rest of the family as well.

This commentary was written by Nick Malkoutzis and appeared in Athens Plus on May 28.