The bull in the china shop

"Why don't they sell (us?) Rhodes and the islands to repay the debt?" It was March 3, 2010, the Greek crisis was just beginning but Germany was already very strongly on the warpath. That is why "Bild" did not think twice about putting that headline on the front page, quoting a German member of parliament; creating an immediate uproar in Europe; and indignation in Greece.

After more or less two years, after German electoral wavering and stalling allowed a problem that was 2% of the Eurozone's GDP to spread to the entire area, after forcing Berlin to intervene financially because of the intertwining of German banks and Greek sovereign debts, Angela Merkel was preceded at yesterday's European summit by a proposal that, this time in no uncertain terms, aims at fully expropriating Greek national sovereignty on budgetary policies and entrusting it to an EU commissioner. It is not the first time, nor will it be the last that Merkel's Germany in Europe acts like a bull in a china shop.

However, doing so precisely on the day in which 26 out of 27 heads of Government of the Union are called to approve the fiscal compact, the pact that will impose in a binding way strict checks and semi-automatic sanctions to Countries that deviate from having balanced budgets or from the new rules to reduce debts, definitely seems like a reckless move.

Because the new European pact locks down in a new Treaty something that looks too much like the surrendering of national sovereignty on the spending levers, in fact like a gradual "Germinification" of budgetary policies of the Eurozone and not only; and because, in this difficult situation, the ill-timed announcement of the desire to commission Greece is a lot like a veiled comment.

It is certainly how many European leaders interpreted it: not only and not so much Mediterranean leaders, the big German target, who did not say anything (except for Greece), but the others, the virtuous ones with the triple A or along those lines that branded it as "unacceptable", "offensive" or "dangerous for democracy".

These were the words used respectively by the Luxembourg's Jean-Claude Juncker, Austrian chancellor Werner Fayman, and Denmark's Helle Thorning-Schmidt. Only the Swedish and Finnish prime ministers stood by German; to the point that Merkel at the end moderated her language.

No one denies that Europe and the euro undergoing a crisis and on the road to a new recession need more integration of macroeconomic and budgetary policies as well as a gradual injection of German virtues; no one even denies that Greece too many times has gone missing in respecting the commitments that it made; however there is a great distance from this to surrendering national sovereignty in the name of a European economic and financial stability that cancels also future risks of solidarity contributions to more vulnerable Countries. Yesterday's general outcry, which saw few exceptions, is no coincidence.

Healthy Northern European countries really like Merkel if, with her strict discipline, she safeguards them from the costly instability of the South of the Eurozone. Not if she outflows in their boundaries undermining the sovereignty and survival of the fundamental principles of their respective democracies.

Without the solid support from the North, Germany is not able to impose brutal expropriations on anyone: not on Mediterranean countries and maybe not even on Greece. However it is able, once again, to do a lot of damage. In a moment in which markets seemed relatively at peace, Merkel's quip aroused nationalisms together with ghosts of the worst politics that European integration had exorcised; and that now risk bringing to a new destabilization.

"Anyone who forces people to choose between financial assistance and national dignity ignores a crucial lesson from history," said Greek Finance Minister Evangelos Venizelos, implicitly recalling the Nazi occupation of his Country.

A disservice to postwar Germany; a disservice because others did not say it but certainly thought it; a disservice because in Ireland a crushing majority (72%) wants to ratify the fiscal compact through a referendum, with all the risks this entails. Those in favor and those against for now are almost equally split (40% against 36%) but a lot less than German projects is needed to tilt the balance towards a negative mood.

It was a disservice because even before the Chancellor's slip up, Belgium's Elio di Rupo strongly rejected "European intrusions in budgetary policies when we do not do so in other people's homes". A disservice also because the Czech Republic did not sign the fiscal compact; finally, a disservice because also Germany is not spotless: for example it is among the very few (along with Austria) that has not adopted in its national regulations the European directive on the liberalization of services, a sector that weighs for over 70% of European GDP, taking from its partners, through its protectionism, a significant growth potential in these difficult times. Right! Because recovering stability does not come just through rigor: without a push on development it risks becoming a useless exercise; and also a dangerous one.

(Traslated by Yael Schrage)

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