Throughout the current European recession, Germany has been the staunchest advocate of austerity. Now, as Spanish and Italian government bonds hit the European markets in an attempt to overtake the crisis, many see Germany as blocking the European growth. Germany’s chancellor, Angela Merkel seems to be isolated more than ever in her strict conditions concerning austerity.
Lately the international pressure on Germany has cranked up; many realize the need for the single currency to ‘breathe’. The situation also shows that Germany’s measures are not working. Europe is depicted as a sinking ship with engines off; the crew is desperately begging captain Merkel to start the engines, which she stubbornly rejects.
Germans seem to have a common perception that the countries which got massive bailouts like Greece, Spain and Italy did not try very hard. There is a belief that one should improve by going through hardships. Thus, the German strong position on austerity is a mix of political will, history, and character. The same perception is shared by most Americans, disappointed with Wall Street giving out taxpayer dollars instead of punishing wastage.
Even though the slashing tempo chosen by Germany is wrong, the overall belt-tightening is a must for overcoming huge deficits like Spain’s; it’s been growing at 8.9 percent, which is everything but sustainable. To unsure it, one has to cut spending. The speed of fiscal consolidation, however, has to be moderate, to avoid mass opposition and riots on the streets.