Tight-fisted Germans resent paying for profligate Greeks, Irish and others

“WHEREVER there’s a fire in the euro zone, the financial firefighters rush to the scene. That’s us,” jokes Oliver Welke, Germany’s version of Jon Stewart, an American comedian. Although the IMF and European Union are acting as co-rescuers of Ireland and Greece, Germans see themselves as rescuers-in-chief—and they resent it. “Will we finally have to pay for all of Europe?” asked Bild, a tabloid.

Other Europeans see Germany as an arsonist. Angela Merkel, the chancellor, has twice dithered, arguing about conditions for a rescue even as the flames took hold. Her demand that creditors must share in the losses triggered what is now being called the “Merkel crash”, which threatens to engulf not just Ireland but Portugal, Spain and even Italy. Luxembourg’s Jean-Claude Juncker, leader of the euro group of finance ministers, frets that the Germans “are losing sight of the European common good”. Spain’s problems start in Germany, wrote a Spanish analyst in the Financial Times. Joschka Fischer, a former German foreign minister, accused Mrs Merkel of bowing to “German domestic politics”.

There is more than a grain of truth in this. Germans were loth to give up the D-mark in 1999 and have never warmed to the euro. In 2008, some 56% of Germans wanted the mark back, according to Allensbach, a pollster. Despite the panic about Greece, that share was down to 47% in April, but only a third of Germans had “great faith” in the euro. Mrs Merkel, whose coalition government has so far disappointed voters, wins plaudits when she takes a tough line against errant euro members and scorn when she seems soft. Her Christian Democrats fear that a demagogic D-mark party might emerge to steal votes.

German behaviour is guided by more than petty politics. In adopting the euro the Germans thought they were joining a condominium, in which every member would keep order on their own property, and not a messy commune. Now the crisis threatens that understanding. The Greek bail-out and the €750 billion ($980 billion) war chest created in May to defend the euro look to many Germans like a violation of the “no-bail-out clause” in the Maastricht treaty that created the euro. The government insists it is not, because the aid is voluntary and temporary. The constitutional court is evaluating this claim. The proposed successor, a permanent facility plus procedures to impose losses on creditors of insolvent countries, needs a treaty revision to pass constitutional muster.

Mrs Merkel is struggling to balance demands for European solidarity with German notions of responsible behaviour. Aid to Greece was coupled with fierce budget cuts. Ireland will pay higher interest rates than Greece for its €85 billion. “We still have the feeling that others have done everything wrong, and we have done everything right,” says Peter Bofinger, one of the five wise men who advise the government on economic matters. Germany wants the remedy “to hurt so next time they don’t do it again.”

Some measures proposed to calm the markets seem unthinkable to many Germans. Mr Bofinger wants outstanding euro-zone public debt converted into “Eurobonds” with collective responsibility. Yet rumours that the government was contemplating a Eurobond drew rebukes from the Free Democrats, the junior partner in the coalition. Holger Schmieding, chief economist of Berenberg Bank, thinks governments should guarantee the debt of any country that submits to an adjustment programme approved by the EU and IMF. That looks like another non-starter.

“Save Our Money!”, a new book by the former head of the Federation of German Industries, Hans-Olaf Henkel, suggests splitting the euro zone into a hard-currency union led by Germany and a French-led southern group that could devalue to regain lost competitiveness. But the notion that Germany is poised to stalk out of the euro is far-fetched. Germans may say they want the D-mark back, but fewer than a tenth see this as a realistic possibility, says Allensbach. “People know what they have in the euro and in Europe,” says Nikolaus Blome, Berlin bureau chief of Bild, the loudest media voice of German disgruntlement. “Unlike in England, there is no Europhobia in Germany.”

The Irish rescue has sparked little of the populist ranting directed at lazy, early-retiring Greeks, who were told to sell their islands and the Acropolis. Ireland had a dynamic economy and (at first) a balanced budget. Its problems were caused by a burst property bubble and can be solved, the Germans hope, by export-led growth. When Greece was the lone outcast, it was easier to contemplate evicting delinquent countries from the euro, as Mrs Merkel fleetingly proposed. It is harder to envisage a mass expulsion of Ireland, Belgium and much of the Mediterranean, whatever Mr Henkel may say. Although fewer than a fifth of Germans backed a Greek bail-out in April, almost half now support the Greek and Irish rescues, according to another poll.

The economy may be steadying German nerves. GDP is expected to grow by 3.5% or more this year and by at least 2% in 2011. With unemployment falling and wages expected to rise, consumption is at last starting to pick up. Retail sales jumped by 2.3% in real terms in October, suggesting that domestic demand may provide more thrust to an economy that is overly dependent on exports. That should help the rest of the euro zone. When the economy is strong it is easier to believe the politicians’ mantra that Germany is the euro’s main beneficiary. Little as they like fighting fires, Germans do not want their own economy consumed in the flames.