Much like the United States, the European Union has been living in an economic dream world where moral hazard does not exist, says Roger Cohen in a recent New York Times op-ed piece. A lack of financial oversight is in large part why countries such as Ireland, Greece, Portugal and Spain are on the precipice of financial disaster, and European Union bailouts have achieved the illusion of short-term stability. Like many Europeans, Cohen wonders where the next bailout will come from – and whether German Chancellor Angela Merkel is willing to put her money where her mouth is when it comes to propping up the euro.
Germany supports the euro, but aren’t doing enough to save it
Angela Merkel once said that “If the euro fails, then Europe fails.” When Germany re-unified, it gave up the Deutsche Mark for the euro as a condition (“a Faustian bargain,” writes Cohen), so Berlin would appear to be invested in the euro’s success. Of late, as the financial foundation of the European Union has begun to show cracks, Merkel has reportedly done more finger-pointing than taking responsibility for the European Union’s future. She says she wants a euro zone 2.0 by 2013, a fiscal union in which the individual European states and shareholders follow strict financial guidelines or face severe punishment. But when it comes to the real sacrifice needed in the short term, Merkel has had little or nothing to say, writes Cohen.
‘Will we have to pay for all of Europe?’
The German tabloid Bild has mocked what it refers to as Chancellor Merkel’s hollow pronouncements. Germany’s pledge to hold to the ideals of a unified Europe has given way to condemnation of “euro zone sinners” whose rampant, largely unrestrained speculation has led the European Union to the edge of a canyon. Unless Germany consumes more, complains less and brings creative invention to solving the European economic crisis, Cohen suggests that more euro zone defaults will occur, and the nations with the most financial trouble will be set adrift. Angela Merkel and Germany must honor commitments and stand by the kind of tough decisions all leaders in the European Union must now make.