New York Times Editorial: European Disunion

New York Times Editorial: European Disunion
Copyright by The New York Times
Published: March 22, 2010
http://www.nytimes.com/2010/03/23/opinion/23tue2.html?th&emc=th


A few weeks ago, a solution to Greece’s debt problems seemed close. The Greeks did their part by adopting a tough new austerity program earlier this month. But Europe has not followed through with the needed guarantee that the money Greece must borrow to pay its bills will be safe from default.

That is a big problem for Greece, and for the European Union, whose reputation for effective coordination is suffering. It also is bad for the United States. The nervous decline of the euro pushes up the dollar, making exports more expensive and slowing America’s recovery.

The European Union has been unable to deliver because Chancellor Angela Merkel of Germany, Europe’s biggest, richest country, has been unwilling to lead. If Mrs. Merkel does not do so at this week’s gathering of European leaders in Brussels, Greece may be forced to turn to the International Monetary Fund instead.

That would deal a damaging blow to the European Union’s credibility and would also raise serious questions about the euro’s future. Five of the 16 countries that use the euro are now facing serious fiscal difficulties.

Greece does not need, has not asked for, and would not get a bailout loan. But it does need European guarantees to roll over its loans at affordable interest rates. Greece now pays 6 percent interest, twice the German rate. For its austerity program to work, that rate must drop or debt service will wipe out most of the savings.

German voters, proud of their economic competitiveness, resist the idea of helping Greece, or other troubled countries like Ireland, Italy, Spain or Portugal. But Germany’s economic strength is not just built on German hard work and efficiency. It is built on consumer demand elsewhere — including its deficit-plagued euro partners. German voters who favor casting Greece and the others adrift seem to miss that connection.

Mrs. Merkel has not slammed the door on a European solution. She says Germany is prepared to support “stability” as long as it does not have to put any money on the table. Greece says it is not seeking bailout money now, just loan guarantees. There is room for a deal, but it will require German leaders to take on parochial domestic opinion for the larger European cause. Mrs. Merkel’s predecessors have done that in the past, and the European Union has been stronger for it.