Angela Merkel in European Summit
Almost every leader of the countries in the Europe who are under Economic stress would grieve against Chancellor Angela Merkel of Germany for her decision to not pass the deal to make a joint Euro bond any time sooner. As of now, the leaders of France, Italy, Spain and Greece etc has identified the Eurobond creation as one of the smartest move in saving the Euro zone from the spreading crisis. Certainly, the pumping of Eurobonds in the world market would inevitably relieve Italy and Spain from their rocketing interest rate on their latest public lending (Spanish bonds reached 6.8% for its 10 years bond which is close to 7% or something analysts term as the signal of crisis). Therefore, almost everyone from banking, politics and other sectors who are vulnerable to European failure would loathe on Mrs. Merkel’s so-called suicidal decision to prevent joint Eurobond. No wonder, various European business publications have termed Mrs. Merkel as European Terminator or even female Hitler whom shall be soon leading the European Economy to its deathbed (CNBC, 2012). However, has anyone thought about how it looks from the chair of the paymaster?
Germany’s economy is still growing and, it hasn’t much inherited the fever of European crisis yet. Germany still takes on a healthy annual growth rate of 3% and its 10 years bond is far below 3%. Technically that is well above average performance if compared to the rest of the European Economy. Therefore, Germany wouldn’t want to pull itself down to the average for the sake of the rest of falling Europe after that, it has been lending so much money to the failing economies of the Europe as a part of its responsibility towards EU. In meaning, creating a joint Eurobond would be advancement to the monetary convergence in European Union that would pull every participating nation’s interest rate to the average. It is something that the above average performers would dislike while, the below average performers would drool about. This kind of situation was vividly seen decades ago during the previous version of fiscal union in EU, in which the economically strong countries like Germany, Scandinavians, France and Switzerland etc had to face a slow growth rate in order converge with the growing economy of initially poor countries like Portugal, Spain and Ireland (Collier, 2007). This time Mrs. Merkel is quite lonely with Germany being the few of the above average performer against the most of the failing European Economies (even previously strong countries like Italy and Spain). Even France doesn’t seem to have a proper economic outlook after rationalizing the Hollande’s (the newly elected President of France) retaliation against Merkel’s decision to forbid Eurobond creation. However, few of the above average performers in Northern Europe (esp. Scandinavia) is willing to support the Merkel’s decision to void this kind of economic union in EU (CNBC, 2012). It at least proves the behavioral pattern to the catch up related to international convergence.
No doubt, Mrs. Merkel is in a state of moral dilemma to forsake the interest of her fellow German citizen in order to satisfy the interest of her international friends or vice versa. Certainly, hard logic makes the most sense in here. Mrs. Merkel has done enough for the failing Europeans by pumping vast amount of money into their economies as part of the national responsibility for the international community. Now, would it be fare for her to endanger the national economy for the sake of rest of failing Europe? Well, she has said for it and it’s a big ‘NO’. At least, it wouldn’t sound politically logical after when the election is nearing and every bit of economic indicator counts more than it ever did. Besides, Merkel is still disappointed with the lack of seriousness of bail out receiving countries in following the prescribed austerity measures.
Therefore, Mrs. Merkel could be right from her own standpoint even if the rest of the world may not find it so. There are so many sensitive pre-conditions governing the current political economy that it is hard to judge the right from the wrong. Interestingly, everyone can make their own judgment and no wonder, they have already done so.
Reference:
Collier, P. (2007). Bottom Billion: Why the Poorest country are failing at what can be done about it? Oxford University Press.
CNBC, 2012. From Nazi to Terminator Europe’s Media Target Merkel. Retrieved from http://www.cnbc.com/id/47991748 at 30th June 2012.
