BERLIN – Ever since the global financial crisis erupted in September 2008, the European Union has been in turmoil. On the one hand, the euro protected the eurozone, particularly Germany’s export economy, from speculative attacks and the chaos of currency volatility. On the other hand, the second phase of the crisis mercilessly exposed the euro’s Achilles heel: the absence of economic or financial unification within the eurozone. Rising tensions within the EU have been the inevitable result.
Germany’s actions throughout the crisis have been plainly contradictory. Rather than moving forward in the direction of an economic union, it reverted to a policy favoring national solutions. But that position is difficult to reconcile with Germany’s inability to call into question the euro or European structures and treaties.
The contradictory stance of Chancellor Angela Merkel’s government was exacerbated by the transition from the grand coalition during her first term to the current conservative/liberal coalition. At that point, self-inflicted domestic political weakness collided with the fiscal constraints of the euro rescue.
At first, Merkel had a hard time getting the Bundestag – and even the parties in her government – to approve the initial “small” rescue package for the euro, promising that Germany would not have to pay any more than that. By nightfall on the same day, however, she had to assent to the much larger €750 billion rescue package in order to prevent an EU-wide disaster. That created a multi-layered credibility problem for Merkel that continues to haunt her.