Why Germany Will Eventually Bail Out Its neighbours

Have you ever been in Italy during the summer holidays? If you have, you will have noticed that in August the country comes to a complete standstill. It is the Italians’ sacred month of vacation.

This year, however, one man refuses to take a break: Mario Draghi. The head of the European Central Bank is instead focused on a more important duty: saving the euro. And everyone wonders: Will he succeed?

I think he will. The key factor is to convince Germany, Europe’s richest nation, to pay other countries’ bills once again. And that might well happen. The reason for this is as basic as it is underreported: 67 years after World War II, German policymakers still feel guilty. They are committed to guaranteeing peace in Europe — and keeping Europe united through the euro is viewed as critical.

Germany is perceived as driving the discussions on how to solve the euro crisis. That perception is based on the Germans’ nature: In a country where discipline is a fundamental part of life, no one is fond of bailing out governments famous for bending rules and running deficit budgets.

Spain, Italy, and Greece have kept their heads just above water so far, but it is mostly because German political leaders have made concessions on the backs of their own taxpayers. The Greek bailout package, the capitalising of Spanish banks, Draghi’s flooding of the markets with euros — all happened with the backing of Germany.

Observers have offered a variety of reasons for Germany’s accepting measures so diametrically opposed to its Lutheran nature. Some say the country has benefited more from the introduction of the euro than any other nation, and might even make a profit from bailing out other countries. Others point out that the price of a eurozone breakup for Germany would be far higher than the cost of being a euro saviour .

Those who stretch their analyses from economics to politics will find another, more dogmatic reason: World War II.

Almost all German political leaders have links to that war — a direct one because their parents lived it, and an indirect one because they themselves lived in a divided Germany.

Living in a country occupied and torn for having started the most horrible wars in history has left lasting marks for this generation of Germans.

For politicians of German Chancellor Angela Merkel’s generation, preserving peace at home and elsewhere in Europe has been the ultimate goal. It is a goal that goes far beyond short-term economic calculations. The euro is the most tangible and irrevocable step. It is the coronation of the European peace project.

It is not hard to find evidence of Merkel’s reasoning. In almost every political speech she makes at home, she refers to Germany’s peacekeeping role in Europe — with Germany’s support for the euro as the epitome of that role.

“If the euro fails, Europe fails,” Merkel famously told her countrymen. I was present for one of those speeches, in 2009. In her one-hour address, Merkel, remarkably, spoke five minutes about the current European elections and no less than 55 minutes about Germany’s war past.

In these times of crisis, Merkel has more reasons to defend her vision than ever before. The spreading economic recession is causing nationalist reflexes all over Europe. In Greece’s latest elections, the neo-Nazi party Golden Dawn received 7 per cent of the vote. In other core European countries, such as France and the Netherlands, the far right is on the rise, too.

These events provoke fear inside and outside Germany, as they are very similar to what happened to Europe in the 1930s. German politicians can’t afford to let history repeat itself.

Former British Prime Minister Tony Blair explicitly used the comparison to convince the Germans to take action.

The euro crisis “is a new experience for us, best compared with the situation in the 1930s,” Blair was quoted as saying in the German newspaper Bild in July. “All the alternatives are ugly. But the best one of them for Europe, and especially for Germany, is to save the euro.”

Economic journalists and analysts are right, of course, to point to the economic consequences of a euro breakup. But the political decisions are far more important. A unified Europe will use the euro as its common currency, or it will not be unified at all. The latter is simply not an option for Germany.

So Spain, Italy, and Greece need not worry, their euro will be saved. Not without an expense, though. Their citizens’ days of early retirements, short workweeks, and lengthy vacations could be over. Germany won’t accept any more of that.

It’s time for some discipline. Except in August, of course, when it’s the national holiday season. Right?

Peter Vanham is a financial reporter and a Belgian fellow of the Pascal Decroos Fund for investigative journalism. He is writing for The Inquirer this summer. ___

(c)2012 The Philadelphia Inquirer

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