Delivering his annual “Berlin Speech” – which the country's largely ceremonial president uses to address issues important to German society – Köhler slammed recent sparring among the members of Merkel's uneasy right-left government just as the country needed leadership.
“The crisis isn't the backdrop for staged battles. It's a test for the entire democracy,” he said, referring to jousting between the chancellor's conservative Christian Democrats and the centre-left Social Democrats. “Even in the run-up to the Bundestag election there's no holiday from the government's responsibility.”
Merkel's coalition of convenience has begun to fray around the edges over the past few weeks, as Germany's largest parties begin to position themselves ahead of the general election this September. However, Köhler also praised the grand coalition for so far avoiding knee-jerk reactions to the unprecedented economic downturn.
“The course chosen is correct,” he said.
Köhler, who is the former head of the International Monetary Fund, then turned his attentions to the causes and ramifications of the global crisis. He lambasted financial markets without regulation or morals.
“Now we're seeing that the market cannot manage everything on its own,” he said. “The market needs a strong state to set rules for it and make sure there is compliance.”
But he said greed and profit-maximisation on the world's financial markets weren't alone in sharing the blame for the current crisis.
“We have all lived above our means,” Köhler said, pointing out that the standard of living in Germany and the West had steadily increased since the 1970s – but so too had public debt.
Despite such a terrible inheritance to pass along to the next generation, Köhler said Germany's famed “social-market” economy could be a model to other nations.
“It's more than simply an economic model,” he said. “It's a system of values.”