"But the approach taken by Germany seems very sensible to me."
Germany is looking to create a rules-based system that every country follows and is accountable to, like they were supposed to when the Eurozone was created. This isn't a bad thing, but its forcing the PIIGS (Portugal, Ireland, Italy, Greece, Spain & Cyprus, if anyone ever notices how had that's getting, but its small anyway) to play chicken with the financial markets and increasing their interest rates to a point that forces them to fix the structural faults in the national budgets.
Germany rightly shouldn't be paying the costs of Greece's, or soon Italy & Spain's, pension obligations and the hundreds of billions in Euros of debt built up over the last decade or more because of poor national policy. Though that is what is happening for now. The current fight, which is being missed by most of the media, is whether Germany will be paying the future costs of the PIIGS+C as well and Angela Merkel is aiming to create a new rules-based system to force these countries to increase productivity, reduce labour regulation and stop spending on wasted projects. Good luck to her...
>Germany is looking to create a rules-based system that every country follows and is accountable to, like they were supposed to when the Eurozone was created.
Right, but they're running up against a very fundamental problem: There isn't any mechanism to enforce the rules. The worse the Greeks (and others) behave the more money the Germans are expected to provide to clean up the mess in return for "This is really the last time I promise" kind of assurances.
Of course what Merkel wants is a kind of United States of Europe, where everybody surrenders enough sovereignty this sort of thing can't happen. But will the other countries go along? Paint me very skeptical.
Germany is looking to create a rules-based system that every country follows and is accountable to, like they were supposed to when the Eurozone was created. This isn't a bad thing, but its forcing the PIIGS (Portugal, Ireland, Italy, Greece, Spain & Cyprus, if anyone ever notices how had that's getting, but its small anyway) to play chicken with the financial markets and increasing their interest rates to a point that forces them to fix the structural faults in the national budgets.
Germany rightly shouldn't be paying the costs of Greece's, or soon Italy & Spain's, pension obligations and the hundreds of billions in Euros of debt built up over the last decade or more because of poor national policy. Though that is what is happening for now. The current fight, which is being missed by most of the media, is whether Germany will be paying the future costs of the PIIGS+C as well and Angela Merkel is aiming to create a new rules-based system to force these countries to increase productivity, reduce labour regulation and stop spending on wasted projects. Good luck to her...