Article 2.
NYT
Europe’s Contagion
Editorial
November 16, 2011 -- Two years of gross mismanagement of the euro-zone debt crisis have all too predictably produced a wider crisis of market confidence that now threatens the entire 17-nation euro zone. This week’s formation of new technocrat-led governments in Greece and Italy has not calmed fears. Practically every euro zone country is paying the price in higher interest costs and ebbing economic growth.
The only country that isn’t suffering — yet — is Germany, whose competitive export-driven economy feeds on foreign demand and an exchange rate held down by its neighbors’ troubles. But all European countries cannot be Germany and run net surpluses, especially if Berlin insists on policies that keep factories shuttered and workers unemployed.
And German leaders are wrong if they think their country will remain unscathed as its major trading partners and neighbors unravel. Chancellor Angela Merkel of Germany has been talking a more pro- European line. But she is still insisting on growth-killing austerity as the price for European bailouts and still blocking the European Central Bank from printing more euros and acting as a lender of last resort.
Mrs. Merkel’s advisers insist that she is doing what the German people want. That is not leadership. She needs to challenge her voters’ simplistic stereotypes of southern European sloth and tell them the truth: The real threat to Germany isn’t inflation; it is an economic collapse across Europe. And Germany has a huge amount to lose from a fracturing of the European Union.
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