BERLIN Nothing is seizing Germans’ attention this week like their national soccer team competing for the coveted Euro cup. After their soccer stars, though, the name on many lips and minds here is Ronald Reagan.
Germans are remembering that on June 12, 1987 – 25 years ago last Tuesday – U.S. President Reagan stood near the Brandenburg Gate and implored, “Mr. Gorbachev, open this gate. Mr. Gorbachev, tear down this wall.” It is a cherished memory, and Germans are still grateful to Reagan for it.
Today, however, America is imploring Germany to act on another global issue, and Germans are not embracing the message nearly so readily.
With the euro in crisis, and the threats to America’s markets and 401(k)s real, the Obama administration and other U.S. leaders and pundits are urging Germany to lead the way out. That means spearheading fundamental reforms in the eurozone, as well as providing the financial backing to stabilize Greece and Spain – and perhaps Portugal, Ireland and Italy as well.
This is hugely unpopular with the average German. Imagine if the U.S. were being urged to bail out Mexico. So German leaders are keeping a cool exterior, even as chaos spreads around them. Greek elections today could lead that country to leave the eurozone. Interest rates on Spanish debt are the highest since that country joined the euro. The future of Europe’s union and currency is unclear.
Yet a series of meetings I had last week with senior German business and government leaders suggests Europe’s strongest nation (unemployment is around 3 percent) is in no rush to swoop in to the rescue. In separate interviews, two top officials in Chancellor Angela Merkel’s government suggested a series of structural reforms, not an unconditional infusion of cash, will heal Europe’s troubles in the long-term.
“You can create the wrong incentives. If you give people the right to spend on your bill, everyone would do it,” one official said. Said another: “The U.S. would love for us to throw money (at struggling countries) morning, noon and night. But there is no short-term fix.”
America has its own economic problems, and some leaders we talked with resented the blame they feel Europe is receiving for America’s sluggishness. But it’s also true that the euro crisis could have deep implications on the U.S. economy and politics. If the euro crumbles, Europe falls deeper into recession, and the U.S., its largest trading partner, likely follows. The timing of that, in turn, could determine the outcome of the presidential election.
This is all being watched especially closely in Charlotte, whose financial sector could be among the hardest hit.
Europe rushed into a common currency with no common fiscal policy among the member countries. That was a big mistake. German and European financial leaders are intent on fixing that as part of any bailout. That will mean Greece and others relinquishing some national sovereignty while getting control of their debt.
German business leaders seem more concerned about the immediacy of the crisis, but equally resigned to the lack of any silver bullet. Markus Kerber is the CEO of the Federation of German Industries, which is like the U.S. Chamber but with more influence. European leaders, he said, hoped in the early 1990s that creating a common currency would unite divergent economies. It hasn’t happened. Only by making structural reforms can the euro survive.
“You cannot be the dominant economy Germany is without shouldering responsibility for the overall mechanism. Being a leader is a bit costly,” Kerber told me and other U.S. journalists.
But he added, “You can’t solve a 10-year problem in three years. More patience is needed.”
He thinks it will be five to seven long years before Europe’s economy recovers.
“The muddling through will continue,” he said.
Besides today’s elections in Greece, the next crucial juncture in the euro crisis will be June 28 at the EU summit. It is there, a top official with the European Central Bank told us, that European nations need to make a firm commitment to saving the currency.
The ECB hopes to leave the summit with a basic agreement to move banking supervision from each nation to a central Europe-wide level. The bank also hopes the summit will lead to continent-wide deposit insurance that puts European countries on equal footing.
With that in hand, this ECB official predicted, we could see the beginning of a European recovery by year’s end.
He quickly added: “But we don’t know. It’s very uncertain.”
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