With market confidence in Greece and Italy further eroding, Germany's cash reserves are now the last best hope for the euro. Without a bold, continentwide rescue effort led by Germany, the single currency is likely to disintegrate. Yet it now seems clear, as indeed it should have for the last three years, that Angela Merkel's government would rather risk the euro's collapse than act decisively.
Germany has profited mightily from the adoption of a common currency. Blessed with a dynamic export economy that does most of its trade within the eurozone, it has gained more than anyone else from the greater ease of doing business with its neighbors. What's more, even Germans who remain nostalgic for the Deutsche mark should realize how catastrophic a collapse of the euro would be. The world economy would fall back into recession. German exports would shrink precipitously. German banks, which have large holdings of Greek and Italian assets, would require vast sums from taxpayers to survive. Unemployment and the national deficit would skyrocket.
Germans, in other words, ought to be falling over themselves to protect their currency from meltdown. And yet, at each and every turn, they have done as little as they possibly could. When pushed to the brink, Merkel has been willing to make available modest funds to avoid immediate financial meltdown; under intense international pressure, she has recently persuaded the Bundestag to increase Germany's contribution to the European Financial Stability Facility, a bailout fund for the euro. But despite periodic promises, she has not even tried to look for a large-scale political or financial plan capable of ending the crisis. In fact, she continues to oppose any proposal -- like a truly harmonized fiscal policy or the introduction of Eurobonds -- that might help European economies regain the confidence of the markets. Why?
To explain Germany's response to the crisis we must start from the fact that the country has undergone a dramatic transformation over the last 20 years. In the postwar era, leaders from Konrad Adenauer to Willy Brandt realized that, for Germany to be readmitted to the fellowship of civilized nations, it had to atone for the recent past. Germany thus paid reparations to Israel, concluded peace treaties with its eastern neighbors, and, above all, entered an unwavering alliance with former foes like Britain, France, and the United States.
But the contrite Germany of the postwar era has been long gone. Since Germany's reunification, the need to atone for Auschwitz has been replaced by the desire to draw a definitive finish line underneath irksome talk of the Third Reich.
The first decisive step in this direction was taken in 1998 by Martin Walser, a famous novelist, when he called Auschwitz a "moral baseball bat" wielded by sinister outsiders intent on harming Germany's interests. Germany's assembled political and cultural elite feted Walser's speech with standing ovations.
The call for a finish line went on to shape Germany's foreign policy. In 2002, struggling with a difficult reelection campaign, then-Chancellor Gerhard Schröder decided to exploit his opposition to the Iraq war for electoral gain. His country, he promised, would no longer be America's lapdog; instead, it would go the "German way." Schröder unexpectedly won reelection.
Finally, during the Libya crisis, Germany's center-right government demonstrated that even the traditionally more hawkish and pro-American parts of the political spectrum are now intoxicated by this notion of independence. Foreign Secretary Guido Westerwelle not only refused to let German troops participate in the Libya operation -- he even went so far as to abstain in the crucial U.N. vote authorizing the mission.