Germany dubbed ‘master of Europe’ in euro crisis

Germany is emerging as the master of Europe, analysts said on Thursday ahead of a make-or-break summit on the euro – as the European Central Bank (ECB) set the scene by cutting its key interest rates.

Germany dubbed 'master of Europe' in euro crisis
Photo: DPA

“For the first time in the history of the EU, Germany is the unquestioned leader, and France is number two,” said Charles Grant, of the Centre for European Reform think tank, citing growing inequality ever since the financial crisis struck in 2008.

“Regular summits between Angela Merkel and Nicolas Sarkozy maintain the appearance of parity,” he said. But citing divergent performance whether in terms of public finances, exports or the spreads on bond markets, France has been “forced” to bow to German leadership on economic policy.

Germany strongly backs the ECB’s refusal so far to simply print enough money to buy up a large part of the mountain of debt that many eurozone countries have amassed.

But the ECB’s governing council, under intense pressure to do something, reduced eurozone borrowing costs for the second time in two months, cutting the rate for its main refinancing operations by a quarter of a percentage point to 1.00 percent on Thursday.

The euro immediately firmed to $1.3418 from its rate of $1.3380 before the rate decision, which came just hours before Chancellor Angela Merkel was due to meet other European leaders for a crucial summit in Brussels to save the debt-wracked eurozone.

Yet the bank also said it was expecting eurozone inflation was 2.7 percent in 2011, way above the ECB’s target of close to but just below 2.0 percent.

Merkel said on Thursday she was convinced that Europe would find the right solutions to the debt crisis.

“We will find good solutions. I’m convinced that we will find a solution to all these questions,” Merkel told a meeting of right-wing European parties in Marseille, admitting that talks would be “difficult” at the EU summit.

“I ask for understanding from those who do not have the euro. We must send a strong signal to the outside. Words alone are not enough, we need more ties, we need treaty changes,” she said.

The ECB’s interest rate cut came as no surprise to ECB watchers following a similar move last month as the debilitating debt crisis pushes the 17 eurozone countries to the brink of a new recession.

The high stakes for all EU institutions were highlighted by French President Nicolas Sarkozy who said in Paris that the risks of the EU exploding had never been so great. There would be no “second chance” if the summit failed to come up with a convincing solution, he said.

With the ECB rate cut widely priced in, the markets are waiting to see what other moves the bank – which many see as the only body able to contain the crisis – will take to shore up the debt-wracked euro.

The crucial question is whether the ECB will see commitments by Germany and France to tighten up eurozone budget discipline as sufficiently convincing to give it extra room for manoeuvre.

Under intense pressure to deal with the contagious debt crisis, European governments are moving towards radical changes on the road to fiscal, economic and political union.

In the future, governments that overspend and so increase the risk of market penalties for currency partner governments could be fined or see automatic “corrections” imposed by the European Commission.

A so-called “golden rule” obliging governments to fix balanced budgets and bring cumulative debts back within EU thresholds over time means the EU executive would acquire intrusive powers to rewrite national budgets.

The ECB would only increase its purchases of distressed government bonds, particularly Italian debt once it believed rules and policing mechanisms were in place to ensure that national governments tackle their fiscal deficits, said Chris Williamson, director and chief economist of Markit in London.

An announcement by international credit rating agency Standard & Poor’s putting the sovereign debt of the entire 27-nation on EU on downgrade watch has ramped up the pressure on Europe’s leaders to act.

“The entire world is watching. We must do everything” to save the euro, European Commission chief Jose Manuel Barroso told reporters in the French port city of Marseille.

“It is extremely important that we all together, all the EU, show that the euro is irreversible.”

S&P’s chief economist for Europe Jean-Michel Six insisted the agency was not working on the basis of an outlook that the single currency area would break up.

The ECB has played fire-fighter to a substantial extent throughout the long and debilitating crisis. But its officials insist that such a role is only temporary and it is ultimately up to governments to get their finances in order.

AFP/The Local/hc

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EXPLAINED: Berlin’s latest Covid rules

In response to rapidly rising Covid-19 infection rates, the Berlin Senate has introduced stricter rules, which came into force on Saturday, November 27th. Here's what you need to know.

A sign in front of a waxing studio in Berlin indicates the rule of the 2G system
A sign in front of a waxing studio indicates the rule of the 2G system with access only for fully vaccinated people and those who can show proof of recovery from Covid-19 as restrictions tighten in Berlin. STEFANIE LOOS / AFP

The Senate agreed on the tougher restrictions on Tuesday, November 23rd with the goal of reducing contacts and mobility, according to State Secretary of Health Martin Matz (SPD).

He explained after the meeting that these measures should slow the increase in Covid-19 infection rates, which was important as “the situation had, unfortunately, deteriorated over the past weeks”, according to media reports.

READ ALSO: Tougher Covid measures needed to stop 100,000 more deaths, warns top German virologist

Essentially, the new rules exclude from much of public life anyone who cannot show proof of vaccination or recovery from Covid-19. You’ll find more details of how different sectors are affected below.

If you haven’t been vaccinated or recovered (2G – geimpft (vaccinated) or genesen (recovered)) from Covid-19, then you can only go into shops for essential supplies, i.e. food shopping in supermarkets or to drugstores and pharmacies.

Many – but not all – of the rules for shopping are the same as those passed in the neighbouring state of Brandenburg in order to avoid promoting ‘shopping tourism’ with different restrictions in different states.

2G applies here, too, as well as the requirement to wear a mask with most places now no longer accepting a negative test for entry. Only minors are exempt from this requirement.

Sport, culture, clubs
Indoor sports halls will off-limits to anyone who hasn’t  been vaccinated or can’t show proof of recovery from Covid-19. 2G is also in force for cultural events, such as plays and concerts, where there’s also a requirement to wear a mask. 

In places where mask-wearing isn’t possible, such as dance clubs, then a negative test and social distancing are required (capacity is capped at 50 percent of the maximum).

Restaurants, bars, pubs (indoors)
You have to wear a mask in all of these places when you come in, leave or move around. You can only take your mask off while you’re sat down. 2G rules also apply here.

Hotels and other types of accommodation 
Restrictions are tougher here, too, with 2G now in force. This means that unvaccinated people can no longer get a room, even if they have a negative test.

For close-contact services, such as hairdressers and beauticians, it’s up to the service providers themselves to decide whether they require customers to wear masks or a negative test.

Football matches and other large-scale events
Rules have changed here, too. From December 1st, capacity will be limited to 5,000 people plus 50 percent of the total potential stadium or arena capacity. And only those who’ve been vaccinated or have recovered from Covid-19 will be allowed in. Masks are also compulsory.

For the Olympic Stadium, this means capacity will be capped at 42,000 spectators and 16,000 for the Alte Försterei stadium. 

3G rules – ie vaccinated, recovered or a negative test – still apply on the U-Bahn, S-Bahn, trams and buses in Berlin. It was not possible to tighten restrictions, Matz said, as the regulations were issued at national level.

According to the German Act on the Prevention and Control of Infectious Diseases, people have to wear a surgical mask or an FFP2 mask  on public transport.

Christmas markets
The Senate currently has no plans to cancel the capital’s Christmas markets, some of which have been open since Monday. 

According to Matz, 2G rules apply and wearing a mask is compulsory.

Schools and day-care
Pupils will still have to take Covid tests three times a week and, in classes where there are at least two children who test positive in the rapid antigen tests, then tests should be carried out daily for a week.  

Unlike in Brandenburg, there are currently no plans to move away from face-to-face teaching. The child-friendly ‘lollipop’ Covid tests will be made compulsory in day-care centres and parents will be required to confirm that the tests have been carried out. Day-care staff have to document the results.

What about vaccination centres?
Berlin wants to expand these and set up new ones, according to Matz. A new vaccination centre should open in the Ring centre at the end of the week and 50 soldiers from the German army have been helping at the vaccination centre at the Exhibition Centre each day since last week.

The capacity in the new vaccination centre in the Lindencenter in Lichtenberg is expected to be doubled. There are also additional vaccination appointments so that people can get their jabs more quickly. Currently, all appointments are fully booked well into the new year.