Proof That Merkel Is Europe’s Economic Bully

She’s the most dominant leader in the euro zone with virtual veto power over decisions

by Michael Schuman
Updated on July 9, 2015 — 6:00 AM EDT



“The lesson of this crisis is more Europe, not less Europe,” Angela Merkel said in 2012 as the integrity of the region’s monetary union was threatened by financial instability, touched off by Greek debt, that was spreading through the euro zone’s weaker economies. By “more Europe,” the German chancellor meant a deepening of the continent’s noble mission—peaceful integration to ensure prosperity and democracy—of which the common currency, the euro, is the ultimate symbol.

In the intervening three years, Greeks have come to understand “more Europe” as something different: “more Germany.” That was one of the few clear messages sent in a referendum on July 5 that had everything to do with Greek voters’ views on how Merkel had imposed her vision of Europe on the zone and if their troubled nation would be better served as part of its grand project, or not.

One can debate whether the Greeks, through titanic feats of economic mismanagement and political hubris, have dug their own grave or merely provided others the shovel. But even if Prime Minister Alexis Tsipras commits to another deal, attention has deservedly shifted from the fed-up and diminished debtors to their lenders. Of course, that’s the European Union, a complex organism with numerous regional and national leaders that, in league with the International Monetary Fund, has so far committed $265 billion in bailout funds to Greece. But this is how the EU really works: Germany is the monetary union’s dominant economy, and its chancellor is the region’s dominant leader, with virtual veto power over zonewide decisions. That puts the spotlight squarely on Merkel. And what it’s revealed, despite her calm but firm entreaties, is an economic bully.

Germany and other euro zone countries backed the financing of bailouts, and in return imposed reform on its recipients and other weak member economies. Anything requiring Germany to change its ways, however, went nowhere.

The centerpiece of Merkel’s cure for Europe was fiscal retrenchment. It was an almost maniacal drive for reduced budget deficits and debt levels—the targets for which were already enshrined in euro zone agreements—combined with reforms to labor markets and welfare programs. Merkel believed that such policies would strengthen the euro zone’s financial position and competitiveness. The medicine may be bitter, but in the end, like an ailing patient, Europe would rise from its sickbed with renewed vigor.

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http://www.bloomberg.com/news/articles/2015-07-09/proof-that-merkel-is-europe-s-economic-bully