Europe’s Winners and Losers

BERLIN – Rarely is a high-flying country brought back down to earth in a single night, but that is precisely what happened to Germany recently. In both football (soccer) and politics, the country had come to embody an unseemly mixture of arrogance and denial. It thought itself the measure of all things European, in terms of both the European championship and the European Union. In both cases, it was deceiving itself.

The same night that Germany was thrashed by the Italians in the championship’s semi-finals, German Chancellor Angela Merkel ran up against the limits of her own powers at the eurozone leaders’ summit in Brussels. Germany’s political course since the beginning of the euro crisis two years ago had left it isolated, and she was no match for an alliance of Italy, Spain, and France.

Indeed, she had no choice but to concede and agree to far-reaching changes to the EU’s new fiscal compact that will ease refinancing of the crisis countries and their banks. The German dogma of “no payments without counter-performance and control” was thus off the table, and the bargain struck in the early hours of the morning was exactly the opposite of what she had wanted. The fiscal compact had been reduced to a shambles even before Germany’s parliament, the Bundestag, approved it later that day.

In terms of addressing the eurozone financial crisis, however, the agreement reached in Brussels was anything but a breakthrough, because it never transcended the logic of narrow crisis management. It offers no strategy for overcoming the crisis in the south of Europe, which means that the threat to the eurozone has not been removed.