Growing German power in Europe and the divisiveness and resentment that it generates have become one of the main topics in European politics. Curtailing German power was in many ways a founding principle for Europe. Alas, recent events in Cyprus and the bailout deal, lead by Germany, involving haircuts for Cypriot depositors as a form of a bail-in (the original idea for a bail-in did not involved depositors), are calling the balancing of German power and European interests into question.
The traditional balancing mechanisms are no longer in place. Britain is not a member of the Euro and thus sidelined. Italy and Spain are in financial distress and dealing with austerity measures. France, traditionally the intellectual leader of Europe, under Francois Hollande is no longer playing an equal role to Germany. Michel Barnier, EU internal market commissioner, does not counterbalance German influence in the way Jean-Claude Trichet did during his tenure at the ECB.
This is a dangerous situation for Europe and calls into questions basic European ideals and principles. Germany’s financing of Europe in return for making and enforcing the rules can lead to a dangerous self-fulfilling prophecy and may create a downward spiral in European politics and policy-making. The long-term success of the European Union requires a balancing of interests. Germany has to find a way to support Europe without overreaching.
- Europe’s Disturbing Precedent in the Cyprus Bailout (wallstreetpit.com)
- European Commission says depositor bail-in a ‘possibility’ in other eurozone countries (ekathimerini.com)
- Europe’s Disturbing Precedent in the Cyprus Bailout (fereastrasprelumestratfor.wordpress.com)