The Continentalist: What Burden Can Germany Bear to Save Euro?

The Continentalist: What Burden Can Germany Bear to Save Euro?

The downgrade warning issued to Germany by the credit rating agency Moody’s last week has shaken German public opinion and raised the question of whether Berlin can bear the costs of extricating the eurozone from its ongoing sovereign debt crisis.

The question of what Germany can bear has two components: One involves the financial costs, while the other has to do with what German public opinion can support. Of the two, the answer to the latter question is easier to determine: According to recent polls, 70 percent of Germans are fed up with the euro crisis and increasingly convinced that when it comes to Germany’s contribution to bailing out the European Union’s deficit countries, “enough is enough.” As the Bavarian finance minister recently put it, Europe’s savior should not be put at risk. German Chancellor Angela Merkel simply pointed out that German strength is not infinite.

Germans may be ill-informed about what they are really paying for in Greece and Southern Europe, and they clearly do not recognize the difference between a check and a loan. In fact, it is actually hard to find concrete figures for how much money Germany has already put on the table for the euro rescue, just as it is difficult to get reliable figures about the costs of a possible Greek exit. (Numbers ranging from €45 billion to €83 billion are circulating in German newspapers.) Similarly, the German people may not be well-informed about the benefits Germany has enjoyed because of the euro-crisis -- through negative interests rates on its 10-year bonds, for instance -- and about whether this offsets the fiscal solidarity Germany has shown so far, including its credit engagements.

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