It is no exaggeration to say that this week could be remembered as the week that Europe either pulled back from the cliff or careened off of it altogether, and I'm watching this unfold from Germany.
In more than a dozen discussions with policymakers, I've noticed that Germans do not talk about this crisis the way anyone else does. Some of the differences:
• They seem serenely confident that it will all work out and that this will end with a stronger, more united Europe. There's less panic than you would expect.
• History matters here. In America, we tend to think of the euro zone as an economic entity. In Germany, it's also spoken of as an ideological entity — a political project intended as an answer to centuries of wars and decades of uneasy peace. Giving up on it thus risks much more than mere economic chaos. It risks everything that Europe in general, and the Germans in particular, have been working toward since the end of World War II.
• In part because history matters, France matters. The Germans are very sensitive to accusations that they're attempting to dominate Europe through economic means. To calm that fear, they have been very careful to stay in lockstep with France.
• While Germans worry about the appearance of German power, they also worry about the diminution of European power. If the euro zone dissolves, they worry that they'll be drowned out in a conversation that increasingly takes place between the United States and China, with India and Brazil vying with Europe to be heard.
• But the Germans don't want to be saps, either. The Germans are intent on a new treaty that empowers some entity — perhaps the European Commission — to veto national budgets that break the treaty's rules and penalize countries with large deficits.
• The German embrace of austerity raises an obvious question: If nations in southern Europe are to cut and tax, how will they grow? The German answer, put simply, is "like we did." Ten years ago, Germany was called "the sick man of Europe." Germans attribute their subsequent success to painful reforms they made to their unemployment insurance system, their health care sector and other pieces of their social safety net.
• Germans also think that the markets have somewhat exaggerated Europe's problems. Greece is a basket case. But Italy is not. Nor is Spain, Portugal or Ireland. There is, incidentally, quite a bit of truth to this
• Germany didn't have a housing bubble. Its unemployment rate is below 7 percent and falling. Deficits are going down, too. I'm told that ordinary Germans, though concerned about the European crisis, are not gripped by the sense of panicked urgency you might expect if you were viewing this from afar.
• But Germany recognizes that it has gained from its membership in the euro zone. In particular, the currency union has been like rocket fuel for Germany's exports. Germany has a strong economy, and if it had its own currency, it would be a strong currency and its exports would be expensive. But because it shares a currency with weak economies such as Italy and Greece, its currency is cheaper and so, too, are its exports. By the same token, the weak economies in southern Europe have been harmed by sharing a currency with Germany, as their exports are more expensive.
All that said, the situation is precarious, and neither Germany nor the European Central Bank have committed themselves to the policies necessary to resolve it. So I don't share the serenity of my hosts.
© 2011 Washington Post