German chancellor Angela Merkel in Laatzen, Lower Saxony, March 4, 2008 (Sebastian Gerhard)

European leaders on Monday prepared to enact a fiscal pact that will write balanced budget rules into their national laws despite British opposition to such far reaching fiscal integration. “To write into law a Germanic view of how one should run an economy and that essentially makes Keynesianism illegal is not something we would do,” was how one official from the island nation put it.

Britain effectively deserted the Franco-German led push for economic integration in December when Prime Minister David Cameron vetoed a pan-European reform effort. The seventeen nations in the single currency area will move ahead nevertheless. Most other European Union member states, except Great Britain, are expected to join them, if not formally then de facto.

German demands for strict fiscal consolidation have been watered down significantly in anticipation of Monday’s European Council summit. Where the 1997 Stability and Growth Pact demanded that public deficits remained under 3 percent of gross domestic product, drafts for the latest fiscal pact refer to “structural deficits” which may still allow the sort of short term Keynesian stimulus which the British fear will be “illegal.”

There will still be semi-automatic sanctions for profligate governments that only a supermajority of European countries can overturn and fines imposed by the European Court of Justice worth up to 0.1 percent of a nation’s GDPs.

The northern eurozone countries, led by Germany, insist that deficits must be reduced in the short term and the competitiveness of peripheral states improved for the continent to grow out of its debt crisis. There is mounting apprehension in the south about this plan as people there have seen markedly little progress in recent months.

In Greece and Spain, nearly one out of five workers is unemployed. The jobless rate in Italy and Portugal hovers near or above 10 percent.

Italy, where Prime Minister Mario Monti and his cabinet of technocrats are rushing through reforms to rein in public spending and liberalize the economy, has seen its borrowing costs fall but Greece, Portugal and Spain remain mired in recession with dismal growth forecasts for 2012.

Greece is expected to reach an agreement with banks and investors about reducing its debt obligations this week. Its bailout financing from other European countries could be in peril however if there isn’t a more convincing effort to balance the budget and modernize the economy.

Portugal’s slide toward becoming the next Greece has gathered pace as banks recently raised the cost of insuring government bonds against default. The conservative administration, in power there since last summer, has been enacting cuts and reforms to balance the budget but like other eurozone countries, including France, it is relying mostly on tax hikes to reduce the shortfall in the short term.

If there isn’t more robust growth in Portugal this year, the country could need a second bailout to avoid bankruptcy.

In Spain, where conservatives have also recently taken power, growth is lackluster and unlikely to meet the 2.3 percent target this year. That raises the question whether Madrid will manage to cut its deficit from around 8 percent of economic output last year to 4.4 percent by the end of 2012 as promised.

The Germans, meanwhile, are still reluctant to pour more money into the European rescue fund which many analysts and southern European governments believe will calm markets.

In Davos, Switzerland last week, Chancellor Angela Merkel pointed out that despite last year’s expansion of the European Financial Stability Facility, which now has an effective lending capacity of €440 billion, there is pressure to expand it again. “Now they say it should be twice as big,” she lamented.

Some say, “it should even be three times as big, then we’d really believe you.” And I always ask myself how long is that credible and when is that no longer credible?

What Germany doesn’t want, she added, “is a situation in which we promise something we can’t back up in the end.”

German chancellor Angela Merkel at the World Economic Forum in Davos, Switzerland, January 25 (Remy Steinegger)

German chancellor Angela Merkel on Wednesday deflected calls for expansion of Europe’s sovereign bailout fund and insisted that further economic integration in the eurozone was necessary to restore market confidence.

At the World Economic Forum in Davos, Switzerland, the chancellor said the currency union “must be ready to dare more Europe.”

We will have to get used to the fact that the European Commission, which already has lots of competences, will become more and more like a government.

Germany and other strong economies in the north of the continent want to empower the Commission to penalize member states that disregard European debt and deficit limits. France, Italy and other nations in the south would rather keep this authority in the hands of political leaders.

The German leader said she didn’t believe that a bigger European rescue fund for profligate nations could solve the crisis. She acknowledged that despite last year’s expansion of the European Financial Stability Facility, when the vehicle’s effective lending capacity was increased to €440 billion, there is pressure to expand it again. “Now they say it should be twice as big,” she lamented.

Some say, “it should even be three times as big, then we’d really believe you.” And I always ask myself how long is that credible and when is that no longer credible?

What Germany doesn’t want, she added, “is a situation in which we promise something we can’t back up in the end.”

Germany may be considered the strongest economy in the eurozone but it, too, has to borrow to finance public spending while its debt has grown to a size that is equivalent to more than 80 percent of gross domestic product.

According to the 1997 Stability and Growth Pact, which applies to countries both in and outside of the single currency union, government debts should not exceed 60 percent of GDP while deficits are to remain under 3 percent of GDP. Few countries have managed to meet these targets in recent years.

Whatever the size of Europe’s rescue fund, there will likely continue to be doubt about Germany’s willingness to prevent countries like Greece from defaulting.

Within Finland, Germany and the Netherlands, which are the only eurozone countries whose creditworthiness is still rated AAA by all major credit rating agencies, there is mounting opposition to financing the deficit spending of others.

Merkel’s rejection of a bigger “firewall” to stem Europe’s spiraling debt crisis came days after the managing director of the International Monetary Fund had warned that “across the board, across the continent, without differentiation, budgetary cuts will only add to recessionary pressures.”

Christine Lagarde, the former French finance minister, fears that strict and immediate fiscal consolidation will undermine the fragile global recovery. Merkel’s priority is to reduce deficits in the short term and improve competitiveness in the periphery of the eurozone in the long run.

President Nicolas Sarkozy of France, Christine Lagarde, managing director of the International Monetary Fund and Chancellor Angela Merkel of Germany talk in Brussels, July 2011 (Reuters)

International pressure on Germany to surrender its commitment to austerity is mounting. The International Monetary Fund warned this week that if there isn’t a more interventionist economic policy in Europe, its debt crisis could undermine growth globally.

According to the Fund’s managing director, Christine Lagarde, “Resorting to across the board, across the continent, without differentiation, budgetary cuts will only add to recessionary pressures.”

The leaders of France and Italy agree that Europe needs less budget cuts and a bigger bailout fund—i.e., more German money—as well as joint bond issuance to stave off the specter of the currency union’s collapse.

“With the right set of measures, the worst can definitively be avoided and the recovery can be put back on track,” the IMF’s chief economist said on Tuesday. “These measures can be taken, need to be taken, and need to be taken urgently.”

What are those measures? “Sustaining adjustment, containing deleveraging and providing more liquidity and monetary accommodation,” according to the organization’s latest World Economic Outlook report. In layman’s terms, that’s fiscal stimulus, bank bailouts and printing money.

None of those is particularly popular in Germany nor in the other northern European Union member states, including Finland and the Netherlands, which, probably not coincidentally, are also the only eurozone countries whose creditworthiness is still rated AAA by all three major American rating agencies.

In these countries, there is mounting public opposition to “transfer union,” the notion that the peripheral euro countries should be bailed out, permanently, by the stronger core.

Where Europe’s weaker economies would rather avoid painful economic reforms and inflate their way out of debt, in the north, there is a belief that only improved competitiveness and balanced budgets will allow the continent to grow out of the crisis.

Such high levels of debt as were amassed in the years preceding the downturn may require a contraction and bank deleveraging to restore business confidence. If austerity is to succeed, banks which loaned endlessly to bankrupt countries like Greece and Italy will have to write off part of their outstanding loans and especially public sector workers in Europe’s periphery would need to accept further pay and pension cuts.

Neither is willing to take their losses. The notion that they won’t have to is perpetuated by political leaders and the IMF when they insist that a recession isn’t necessary to level the investment distortions that were caused by artificially low interest rates and the assumption that if a eurozone country were ever to teeter on the brink of default, Germany would bail it out.

Throughout the crisis, Germany has been extremely reluctant to save the highly indebted nations in the south from default. Perhaps the only reason it has is because German banks, too, are exposed to Greek debt. The coming weeks could prove a test for German resolve if Greece once again faces bankruptcy while markedly little progress toward fiscal consolidations has been made. The question is how much longer Germany is willing to pay before it can’t anymore?

A cow under Dutch skies, June 17, 2007 (Willem Heerbaart)

Russia on Tuesday threatened a ban of Western European beef and livestock imports after a virus that was previously known to affect goats and sheep was also discovered in cattle this week.

The Schmallenberg virus, named after the German town where it was first diagnosed last year, has been found in newborn Belgian, Dutch and German calves, lambs and kids. The disease is transmitted by means of insect vectors and has been detected in fourteen Belgian, fifty-two Dutch and twenty German farms.

Mexico and Russia banned imports of sheep and goat meat as well as live animals from the three countries last week. Russia says it could ban cattle imports too if it isn’t satisfied that the virus will be contained. It is also considering a pan-European import ban which the European Commission insists is unnecessary because livestock in other countries isn’t known to have been infected.

It is the second time in less than a year that a trade ban pits the Russians against the EU. Last summer, Moscow prohibited European vegetable imports after a deadly outbreak of E. coli in France and Germany. The Dutch at the time managed to negotiate an exemption for their agricultural sales.

Russian beef imports from the European Union more than doubled last year as the euro weakened against the ruble while currencies in South America, where Argentina and Brazil are major exporters, strengthened. Russia is the largest meat importer in the world.

German chancellor Angela Merkel talks with Prime Minister David Cameron of the United Kingdom during a European Council in Brussels, March 24

The United Kingdom, especially under conservative leadership, has had wanted so little to do with Europe’s debt crisis that French president Nicolas Sarkozy reportedly chastised his British counterpart for asking to be involved in fixing it. Yet the widening rift in Franco-German relations represents an opportunity for the British to define the future eurozone—and maybe save it from fiscal collapse.

French and German interests are increasingly divergent. In fact, they have been since Germany was reunited in the 1990s and the Franco-German parity that had hitherto defined Europe was gone. Paris now worries about Germany’s close relations with Russia while Berlin refused to participate in this year’s NATO intervention in Libya.

France is no longer Russia’s special friend in Western Europe—”at least not exclusively,” wrote Miguel Silva here in August, so “Paris has moved into a rapprochement with Britain in order to hedge its bets.” Within the realm of military adventurism, Anglo-French cooperation is viable but is it economically?

David Cameron seems more inclined to endorse European economic integration on Germany’s terms than France’s—at long as his nation is excluded. The Wall Street Journal reported this Saturday that the British leader was prepared to back Angela Merkel’s push for treaty revision as long as London’s financial center would be exempt from financial reforms and Britain allowed to opt out of new regulations it doesn’t like.

Britain’s desire for a special place in Europe, where it’s able to profit from economic union without sacrificing budgetary sovereignty, has irked existing eurozone nations but as Walter Russell Mead points out at The American Interest, it doesn’t pose an insurmountable obstacles to the Germans.

The French demand that the European Central Bank become a lender of last resort for troubled European governments and banks, on the other hand, is impossible for the Germans to accept. Between the two, the rational German choice may well be to cut a side deal with the British.

With Cameron’s fiat, other European Union member states outside of the currency area, including Poland and Sweden, may also accept German fiscal prudence as the new normal.

If Britain and Germany team up, France, which now teeters on the brink of becoming the next Italy, will have no choice but to relent and implement budget cuts and economic reforms that are long overdue.

Christine Lagarde, managing director of the International Monetary Fund, talks with Wolfgang Schäuble, the German finance minister, in Washington DC, April 15, 2011

As Greece’s debt is increasingly likely to be restructured, European leaders convene this weekend to discuss a plan to prevent banks that would suffer major losses because of it from going bankrupt. A coordinated recapitalization effort, as championed by the International Monetary Fund and the United States, seems unacceptable to creditworthy nations like Germany however.

American officials and the IMF urge European countries to inject public capital into the financial industry to quickly restore confidence in the euro area. The European Central Bank, which has reluctantly financed Italian and Spanish borrowing in recent months to prevent the debt crisis from reaching those countries, would guarantee government debt under their plan.

European leaders are divided on a mass bailout effort for financial institutions however and would rather ask banks to raise capital from private sources in anticipation of a Greek default. They could appeal to their national governments for support and to the European Financial Stability Facility as a last resort if their exposure to Greek sovereign bonds becomes untenable.

Economists at the Brussels think tank Bruegel estimated last year that just 20 percent of Greek debt was held by domestic banks. Another third is held by pension funds and insurance companies in other European countries.

The step by step approach is a concession to fiscally solvent euro nations including Finland, Germany and the Netherlands which were wary of expanding the EFSF to begin with to enable it to bail out banks.

German finance minister Wolfgang Schäuble told fellow christian democrats in Berlin last week that the Greek debt burden “will simply have to be reduced to such an extent as to provide Greece with a reasonable outlook.” But this cannot come exclusively at the expense of taxpayers, he added.

The eurozone’s leaders agreed to another Greek bailout in July after the €110 billion committed last year proved insufficient to steer the troubled country off the brink of bankruptcy.

Last month, it emerged that Greece had failed to miss the deficit target that it had set to qualify for the sixth, €8 billion tranche of the original aid package it needs to be able to pay public sector salaries.

With more than €340 billion in debt, Greece is now among the least creditworthy of nations. Nearly one out of ten Greek workers is unemployed and its economy is expected to contract by as much as 5 percent this year. The lack of expansion, caused by a dramatic drop in consumer spending, is accompanied by higher taxes which are extremely detrimental to private sector growth.

The specter of default does not appear to have engendered a particular willingness on the part of the Greek people to reform. Although subject to heavy austerity measures, including public sector pay cuts and pension reductions, reining in the pervasive Greek state is unpopular.

Government spending accounts for almost half of the Greek economy and the state maintains ownership in airports, casinos, hotels, resorts, railways and utilities. Many of these enterprises are wholly unprofitable and need thorough reforms before they can go to market.

The agency charged with selling off state property employs less than a dozen people while local governments possess no digitalized records of what buildings and land they own.

Greece’s powerful trade unions are another obstacle as they are vehemently opposed to the planned liberalization effort to be carried out by a socialist administration. Athens has promised to net €50 billion through privatizations but consistently falls short of its short term financial targets.

Contrary to the original aid program, the second bailout involved voluntary contributions from banks and insurance companies that had invested in Greek bonds. They were persuaded to accept rollovers on Greek debt which should buy Athens time to get its fiscal house in order.

If Greece were unable to repay all of its loans despite the attempted rescue, it would probably not renege on its obligations to other members of the euro area, thus forcing private bondholders to accept even bigger losses. Investors fear similar partial defaults could happen in countries as Italy, Portugal and Spain which are also heavily indebted and struggling to reduce their deficits.

The German Reichstag building in Berlin, July 11 (João Sheeperson)

A majority of German lawmakers voted on Thursday to expand the capacity and power of Europe’s temporary bailout mechanism, the European Financial Stability Facility (EFSF), after Austria’s and Finland’s legislatures approved the expansion earlier this week.

European leaders agreed to reform the EFSF in July to enable it to react with short term lines of credit whenever a financial crisis threatens to occur in the euro area. Germany and the Netherlands had blocked such changes before, fearing permanent bailouts of profligate member states.

Thursday’s vote may be heralded as a victory for German Chancellor Angela Merkel who managed to quell dissent in her coalition and her own conservative party about a second, €109 billion bailout package for Greece.

The southwestern European country has teetered on the brink of bankruptcy for one and a half year with no end to its debt crisis currently in sight. Tax hikes and privatizations that were promised by Athens in exchange for international support have not sufficed to convince Euroskeptics in the north to continue to bail out the Greeks. The expanded EFSF however, coupled with an increasingly activist European Central Bank that is willing to purchase sovereign bonds from heavily indebted euro nations, should allow Greece to stave off the specter of default.

If all eurozone parliaments vote in favor of strengthening the EFSF, the fund will be able to finance up to €440 billion in credit. That should be enough to save Greece as well as Ireland and Portugal which had to tap into the facility earlier this year after they weren’t able to borrow at an affordable rate on financial markets anymore. If other troubled euro economies like Italy and Spain were to see their borrowing costs mount as well, the facility would not be big enough to finance their rescue.

The ECB has spent more than €40 buying Italian and Spanish debt but its bond purchase operation is controversial in Germany. Other northern eurozone member states, including Finland and the Netherlands, also resist further expansion of the EFSF despite market pressure to bolster Europe’s rescue potential.

The Netherlands and Slovakia, both wary of bailing out profligate euro state in the periphery, have yet to approve the EFSF expansion. The Slovaks, who only joined the eurozone in 2009, have been particularly recalcitrant. They voted against the first bailout in August of last year and their parliament is turned against the rescue operation although the country’s ruling coalition signaled that a compromise may be in reach this week.

A German Green party rally in Berlin, September 12, 2009 (Henning Bulka)

Green and socially liberal parties are the rise across northern Europe. From Britain to Berlin, their electorate is composed of students and young urban professionals who lean left on social issues but do not care for the welfarism and trade union socialism of traditional labor parties.

State elections in Berlin, Germany were closely watched this weekend for a Green election victory. Bündnis 90/Die Grünen won 17.6 percent of the vote, behind the major party social democrats and conservatives but ahead of the liberals and far left which both lost support.

Some of the new Green party voters come from the social democrats who retained their majority despite losing votes; some of them come from the pro-business Free Democrats who didn’t make the election threshold.

The Free Democratic Party, Chancellor Angela Merkel’s coalition partner on the federal level, has performed poorly in recent state elections after it claimed an unprecedented 14.6 percent share of the vote nationwide in 2009. The liberals’ popularity has diminished since with college educated urban voters in particular defecting to the left.

Local elections in Saarland in 2009 may have been a harbinger of a new political constellation in Germany where the Greens refused to cooperate with the social democrats and the far left in favor of an alliance with liberals and conservatives. In 2008, they had previously entered a coalition with the christian democrats in Hamburg.

This year, the Greens tripled their share of the vote in Rheinland-Pfalz and won the prime ministership in Baden-Württemberg, once a conservative stronghold. Their candidate, a sixty-two year old former chemist, belonged to the centrist wing of the Green party and profited from an antinuclear sentiment that swept Germany in the wake of the Fukushima nuclear power plant disaster in Japan in March.

In Denmark and the Netherlands, left of center parties similar to Germany’s Grünen also appeal to cosmopolitan young working people who reject the old left’s reinvigorated market criticism but are appalled by the right’s willingness to embrace populist anti-immigrant and security policies at the same time. They are united around themes of environmentalism, individualism and minority rights.

In Denmark, the Radikale Venstre represents social liberals who oppose the main liberal Venstre‘s alliance with the far right Danish People’s Party. In the Netherlands, the intellectual D66 and progressive GroenLinks together accounted for 13.5 percent of the vote in last year’s parliamentary elections. Both oppose the hardline immigration policy of the liberal-conservative government but favor market driven entitlement and labor law reforms.

The Liberal Democrats in Britain aren’t willing to admit yet that they represent a similar kind of cosmopolitanism. The reason is that part of their leftist electorate doesn’t want to commit to such a direction. As The Economist put it, when they voted Liberal Democrat last year, “they assumed it was a social democratic party with civil libertarianism and Europhilia thrown in; a Labour Party for university towns and upmarket suburbs rather than the industrial heartlands.”

The Liberal Democrats’ alliance with the Conservatives proved their voters wrong. Party leader Nick Clegg, now deputy prime minister, led them toward centrist, classic liberalism, much to the dismay of rank and file liberals who “don’t really believe their party is either liberal in the classical sense or even ideologically neutral between right and left.”

This could be a problem for other northwest European Green parties as well. Their members tend to be more leftist than their voters who are generally skeptical of Big Government welfare schemes. Moreover, part of their base has pacifist roots which could complicate their ability to govern responsibly.

The German Greens realized this in 1998 when they entered a coalition with the social democrats just before NATO intervened in Kosovo. Green party parliamentarians weren’t happy with the war and outright hostile to sending German troops to Afghanistan in 2001. GroenLinks in the Netherlands found itself in a similar predicament this year when it failed to enthuse party members for an Afghan police mission it endorsed.

Wolfgang Schäuble, the German finance minister, during a conservative party event in Bensheim, Hessen, March 27

José Manuel Barroso, president of the European Commission, announced last week that the European Union’s executive body would soon release a report on the issuance of Eurobonds. Joint sovereign bonds for the nations of the eurozone could help stem Europe’s escalating debt crises. It would provide funding for countries that have been cut off from the market and virtually guarantee the solvency of countries at risk, including Italy and Spain.

The announcement seems an attempt on the part of the commission to direct decisions away from individual states toward the political process of the EU. As the crisis has developed, the central forces have been Germany and France, Europe’s two largest economies. Although their leadership role allows decisions to be made quickly, it has also generated a sense of disorder as there has not been a clear understanding as to who is ultimately responsible. Equally, the EU has failed to provide a clear unified voice during the crisis, exacerbating market uncertainty.

While political decisions that relate to the whole of the union should undoubtedly have the consent of those they affect, Germany is in a position of power. As the strongest economy in the eurozone, the sentiment of the government in Berlin will decide whether there is or isn’t a Eurobond.

A recent German supreme court decision ruled that although the bailout measures undertaken by the country to avert a sovereign default in Greece, Ireland and Spain were lawful, further action that would impact Germany fiscally needs the approval of the federal parliament before it can be implemented.

The ruling not only frustrates the pace of future resolutions; it also reduces the probability of there being an issuance of Eurobonds in the near future. Germany has been a reluctant paymaster of this crisis and it believes that any issuance before reforms have been enacted will diminish the incentive to restructure.

As such, the issuance of Eurobonds will likely be a question for the future. If the euro manages to come out of current troubles unschated, with countries ready to accept the reforms needed in order to bring the economies of the European Union into balance, Eurobonds may well be one of the expressions of European integration.

German foreign minister Guide Westerwelle speaks at a liberal party event in Chemnitz, Saxony, August 24, 2009

German foreign policy is changing. Its posturing in the European debt crises and NATO’s military intervention in Libya point in the same direction. Although its reluctance to support its Atlantic allies in the Libyan adventure may be unpopular now, its history, its economy and its geography suggest that Europe’s central power will emerge as its predominant one again.

Ever a strong American ally, Germany startled its friends when it not only refused to endorse a United Nations Security Council resolution that authorized military action in Libya but threatened to withdraw its forces from NATO’s Mediterranean command lest it be involved in the fight after all. While France and the United Kingdom pushed for a resolution and had fighter jets virtually on standby to launch their offensive, Germany, Libya’s second biggest trading partner after Italy, feared being drawn into a protracted civil war and warned its partners that they should not expect “quick results with few casualties.”

The results weren’t quick indeed, in part because of a reluctance on the part of the United States to take the lead but Colonel Muammar Gaddafi’s imminent demise does seem to repudiate the German position. Had they miscalculated? Perhaps. The more important question though is—why?

Germany wasn’t alone in opposing military intervention in Libya. Turkey, a critical NATO partner in the Mediterranean, was also skeptical while China and Russia, two veto wielding Security Council members, treaded carefully. They did not prevent the Atlantic powers from launching air strikes but wouldn’t help either by cutting Gaddafi off. Both feared setting a precedent for interventions under the guise of a “responsibility to protect.” Both genuinely dislike what they perceive as Western nations enforcing their notions of democracy on other people.

Russia, moreover, had maintained amicable ties with the Gaddafi regime and remembered all to well what had happened with its friends in Serbia, Ukraine and Georgia last decade—they were swept aside in a string of color revolutions which Moscow always suspected were funded by Western governments to be replaced by more or less anti-Russian nationalists.

Across Central and Eastern Europe, Russia has lost influence to the United States which, through NATO, acts as the security guarantor of many former Soviet satellite states. Economically, they have become part of Germany’s supply chain however its dependence on Russian gas imports hinders Berlin’s ability to truly protect the interests of once East Bloc nations from within the European Union.

Germany is seeking to circumvent the problem with the construction of the Nord Stream pipeline. If it can import gas from Russia directly, Germany can balance its relation with Moscow at the expense of Eastern European states. The rest of Europe, heated by Iraqi and Turkmen gas through the Nabucco pipeline, can still come together to condemn Russian aggression in its sphere of interest whenever it sees fit but it shouldn’t expect the Germans to put European interests before their own anymore.

The German resurgence maybe started twenty years ago when Bonn annexed East Germany and ended the parity that had existed between the West German capital and Paris. It took a while for the Germans, instinctually pacifist and pro-European after the war, to reassert themselves but when Greece, Ireland and Portugal came begging for their help, the German voters said “no”—even if their government agreed to multibillion euro bailouts for the eurozone periphery.

As Europe’s largest economy, it inevitably bears the financial brunt of any pan-European effort. Within the single currency area, it had little choice not to but the German electorate isn’t convinced. German participation in the Greek and Irish bailouts cost the ruling liberal and conservative parties dearly in location elections in industrial North Rhine-Westphalia last year and the southern christian democrat stronghold of Baden-Württemberg this year.

Hard nosed, sober and financially conservative, the average German sees no justice in bailing out spendthrift neighbors to the south who retire years ahead of him. Chancellor Angela Merkel cannot afford politically to be perceived as anything but extremely reluctant to write cheques for the heavily indebted eurozone economies, even if it comes at the expense of financial stability in all of Europe.

Her government’s more self centered foreign policy has invited criticism from some political heavyweights. Former chancellor Helmut Kohl obliquely chastised his former protégé when he said it was “the most important thing” for Germans to stand with the Greek people in May. He added this month that Germany had “not been a reliable power,” causing him to wonder “where Germany stands today and where it is heading.”

Former foreign minister Joschka Fischer told Der Spiegel that “the lack of fundamentalist convictions” on the part of Merkel’s administration irked him. He described Germany’s role in the Libyan intervention as “perhaps the biggest foreign policy debacle since the founding of the Federal Republic of Germany.” Its standing in the world has been damaged by it, he complained. “Our supreme interest should be holding tight to our anchoring as part of the West. In doing so,” Fischer added, “something that it paramount—and, indeed, essential, is finishing the process of European unification.”

Germany’s interests point the other way though—eastward.