Monday, March 5, 2012

Is Germany's euro strategy working?

I have been guilty, on many occasions, of eviscerating the strategy taken by the leaders of the euro zone to combat its dangerous debt crisis. They have routinely acted too late with too little, causing contagion to spread through the zone, because they have been unwilling to put the interests of the euro over their own political careers.

I have been far from alone in forwarding such a critique. Everyone from George Soros to Timothy Geithner has expressed their concern over Europe’s lack of action. The primary target has been German Chancellor Angela Merkel, who is really driving the entire effort. Her insistence on austerity would send Europe into a tailspin, critics contended, while her continued resistance to steps many believe would halt the crisis – such as a bigger bailout fund, or jointly issued Eurobonds – was putting the entire monetary union at risk.

But sentiment appears to be changing. There seems to be growing optimism in Europe that the worst of the debt crisis is behind them. French President Nicolas Sarkozy was practically giddy at last week’s summit of European Union leaders. “We’re turning the page on the financial crisis,” he said at a press conference. “The strategy we’ve implemented is bearing fruit.” Now I find myself under attack. One former TIME editor is bombarding me with emails saying that my continued gloom about Europe’s future is more and more misplaced.

So is Merkel’s debt crisis strategy actually working? Have its many critics been wrong all along? Well, in my opinion, the answer depends on what we mean by “working.” Read More