Banking Crisis

Germany Must Embrace its Crown of Thorns

Note: This piece was originally published in the Economist as the opening piece in the Debate on Germany's role in Europe

Germany's pole position in the handling of the euro crisis is evident from the fact that everything is on hold until after the German elections, even as German red lines continue to define the contours of current policies in the euro area. Without Germany's economic might behind it, no solution to the euro area crisis is possible.

However, its influence on the political, intellectual and economic aspects of the handling of the euro crisis belies Germany's lack of leadership on these dimensions. The failure of intellectual leadership is perhaps the most pernicious of the three.

The absence of diversity and depth in the German debate on the euro crisis is striking. The inaccurate 'lazy southerner' narrative dominates public and private discussions, and the need for austerity is taken as a given, no matter what the evidence. 'Fuzzy' matters, such as the danger that sharp fiscal adjustment poses to social cohesion and political stability in crisis countries, get short shrift.