MARCH 6, 2015
German banks lent too much to an insolvent Greece? No problem! We’ll breach the legal basis on which the eurozone was formed — the Maastricht Treaty’s “no-bailout” rule, which bans member government from bailing out their peers — and covertly bail out those banks by lending European taxpayers’ money to Athens. German banks also lend too much to insolvent Irish, Portuguese, and Spanish ones? Kein Problem! In collusion with corrupt national elites, we’ll lend to those countries’ governments so they can bail out local banks and thus their German creditors. German taxpayers start worrying that they may end up on the hook for all of Southern Europe’s debts? Then let’s rewrite the fiscal rules, under duress of a financial panic that Merkel’s mistakes have created, and impose a new fiscal straitjacket that gives Berlin and Brussels greater control over other countries’ budgets.
Germany’s vast current account surplus — the excess savings generated by its beggar-thy-neighbor policy of suppressing wages to subsidize exports — was the fuel for German banks’ bad lending that caused the crisis in the eurozone. Now it’s the vehicle through which Germany is exporting deflation. In short, it’s the biggest, most destabilizing imbalance in the monetary union. And it falls afoul of the eurozone’s rules on macroeconomic imbalances. But is that a problem for Brussels? Of course not. The Germans lean on eurozone authorities to get off the hook, and the European Commission bows to Berlin. But voters elsewhere want to change things, even just in their own countries? Nein, nein, nein: There is no alternative.
In the Greek case, the German government has come up with an even more disingenuous argument. There is nothing undemocratic about forcing the Greek government to bend to Berlin’s will, Schäuble asserts: On the contrary, Athens must also respect the wishes of voters in other eurozone countries. And it is true that taxpayers in Germany and across the eurozone would — unfairly — lose out if Greece obtained the debt relief it needs to recover. But why is that? Because Merkel violated the no-bailout rule in the first place, putting the interests of German banks ahead of those of European citizens — including Germans — and setting Europeans against each other. If only German voters realized that Merkel and Schäuble have lied to them and sold them out, they wouldn’t fall into the nationalist trap of blaming the Greeks for their own banks’ and government’s misdeeds!