Zone Germany

Merkel’s Mess (New Yorker)

When I wrote about the Greece crisis a few weeks ago, I argued that in trying
to draw a hard line with the indebted PIIGS (Portugal, Ireland, Italy, Greece,
and Spain), Europe--and in particular Germany--was threatening the status of
the eurozone and running the risk of putting the region's economy back into
recession. Rather than emulating what the United States did back in the early
eighteen-forties, when it allowed eight states to default (worsening the
depression at the time and setting back the economies of the states for years
to come), Germany needed to grit its teeth and bail out its profligate
neighbors.

And for a while there, it seemed like this was what was going to happen, at
least until Angela Merkel, Germany's chancellor, recently decided that it was
time to start talking tough again, and raised the possibility that Germany
might not deliver on the loan package it had promised. It was Merkel's
newfound public ambivalence that initially destabilized the markets and sent
Greek bond yields soaring, with ripple effects across all the PIIGS countries.
Now, of course, Germany is supposedly back on board--and Greece is committing
to even deeper budget cuts (though whether ...

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