Merkel puts the Euro at risk

Last week, Germany proved to be the greatest threat to the stability of the Euro zone, together with Greece. The German press is suggesting that this is mainly due to the liberal party leader Rösler, who is loosely talking about an „orderly“ bankruptcy in Greece. But the main responsibility lies with Chancellor and her finance minister Schäuble: They managed to create a dangerous „double bind“ by linking the future of Germany and of the eurozone as a whole to reform progress in Greece.

The trouble with Merkel is that two years after the beginning of the crisis she is still not able to cut the Gordian knot. She does not only stick to her misperception of the crisis, but she makes everything worse with her policy of „strict conditionality“ for help to Greece. As long as Athens doesn‘t deliver, Berlin won‘t help.

This leads to a viscious circle, frightening the markets and obliging the ECB to intervene. As a result, the crisis deepens, and the confidence in Merkels leadership is shrinking. It does not come as a surprise that even US president Obama is losing faith in the German Chancellor, as Spiegel online reported.

But there is even worse: Even the German elite is turning its back on Merkel. The former German president Köhler resigned as well as the former Bundesbank chief Weber because they did not agree with Merkels policy.

The latest dissident was ECB chief economist Stark, who stepped down ten days ago because he lost faith in the ECB policy as well as in Merkels leadership. His resignation rattled the markets and created new obstacles for the overdue solution of the Euro crisis.

Unfortunately, few people in Germany are aware of the fact that if the crisis escalates and Greece quits the Eurozone, this would affect Germany as well. As the Telegraph put it: There is a real risk of an uncontrolable chain reaction in which Greece and Germany could  threaten themselves with mutual assured destruction.

When will Merkel finally recognize this risk?

(This is a short English version of my most-read post this week. The original post – in German – can be found here.)

Update 19.9.11

The local election in Berlin ended with 2 historic defeat of the liberal party FDP.  This will make the things for Merkel and the Euro even more complicated, as Spiegel online explains here.