BERLIN — As Greece teeters on the edge of the financial abyss, Germany stands accused of having exacerbated the crisis through mixed messages and indecision.
Europe's biggest economy and effective paymaster has not been able to reverse Greece's debt predicament over the past 18 months. Greece is now just a Parliamentary vote away from a debt default, which many in the markets say could be as disastrous for Europe as the demise of Lehman Brothers was for the global economy in 2008.
Critics have argued that German Chancellor Angela Merkel has been too preoccupied with shoring up support in Germany, where the cost of Europe's bailouts is proving unpopular, rather than leading the single currency bloc in a swift resolution of the crisis. The next general election in Germany is not due until the autumn of 2013 but Merkel has suffered a series of severe defeats in state elections over the past few months.
Germany has been criticized for also being too hasty airing initiatives that have stirred market anxieties and ultimately come to nothing.
Most recently, Finance Minister Wolfgang Schaeuble demanded that banks should take their share of the Greek pain, but that proposal was withdrawn following vociferous opposition from the likes of the European Central Bank and the French government. Now, any participation of private creditors in a second bailout expected to total around the size of Greece's first at around €110 billion, will be on a voluntary basis.
"The government has again and again drawn lines in the sand, with the participation of private creditors being the latest example, but those are messages oriented toward the domestic audience and the parliament, and then the lines get crossed anyway," said Jorgo Chatzimarkakis, a European Parliament lawmaker from the Free Democrats, Merkel's junior coalition partner.
Schaeuble's proposal put his government at loggerheads with Europe's other top policymakers and raised fears around the world that Greece would effectively default on its €340 billion ($484 billion) debt burden. Such a move would drag down Greek and European banks and put new pressure on other heavily indebted euro countries, such as Portugal and Ireland, which have also been bailed out. A greater fear would be if much-bigger Spain and Italy get dragged into the mire.
Luxembourg's Prime Minister Jean-Claude Juncker, who also chairs the meeting of the eurozone's 17 finance ministers, publicly vented his frustration with the deteriorating situation.
"Everything is becoming yet more expensive because we are including private creditors due to domestic political considerations in Germany," he told a German newspaper last week.
Since the Greek debt crisis exploded towards the end of 2009, the European response has been marked by bouts of indecision and procrastination, whether it be about the merits of bailouts themselves, the role of the private sector or on the issuance of so-called eurobonds.
Some argue that Germany was slow off the mark and its failure to lead from the front early on and back a comprehensive solution made the debt crisis worse than it should have been.
Ulrich Kater, chief economist of Germany's DekaBank in Frankfurt, said Germany's "very cautious approach" was due to the government being scared that "it could politically backfire if it handled the crisis with its checkbook."
Merkel has rejected suggestions that Germany has been unnecessarily cautious in resolving the crisis engulfing the currency now used by about 330 million Europeans.
"I have made clear — that wasn't hesitation, but a demand — that there can only be solidarity if on the other side the stability of Greece and (its) readiness to reform are proven," she said last month.
German opposition leader Frank-Walter Steinmeier has argued that the government's delaying tactics have not helped matters and resulted in Germany "drifting away from the leadership role to the fringes."
"Solutions at the European level that we first averted for three months, we ended up supporting," Steinmeier, who was once Merkel's foreign minister, said in parliament.
With or without delays, ordinary Germans are wondering whether the cost of constantly bailing out profligate countries on the rim of the 17-nation eurozone is really worth it.
While 80 percent of 1,330 Germans surveyed earlier this month for public broadcaster ZDF said the euro's stability was in danger, 60 percent of them said they were opposed to providing further loans to Greece, with 33 percent in favor.
In a separate poll published Monday by Focus news magazine, 46 percent said Greece should abandon the euro and return to the drachma, and 47 percent of 1,000 people surveyed said Athens should stick to the euro.
The German government has clearly been in an extremely difficult position.
Jeremy Batstone-Carr, director of private client research at Charles Stanley, said it's not fair to blame Germany for the drift in European policy over the past 18 months.
"It's quite clear that European politicians are trying to come up with policy on the hoof as the eurozone was not prepared for a crisis like this," said Batstone-Carr. "It's extremely hard for these people to try to keep all the plates spinning when the situation is as fluid as this."
Germany has won plaudits for insisting that the International Monetary Fund be brought on board for the bailout packages. If the management of the debt crisis was left at the hands of often-squabbling euro politicians, then the credibility of the anti-crisis measures would likely have been even lower.
However history judges Germany's actions, its central role in the crisis is ongoing and likely to last for years. At a summit of European leaders in Brussels at the end of the week, Merkel will again be balancing the interests of her domestic audience against the need to help Greece and keep the euro project alive.
"You can't accuse her of not getting everything right from the beginning on," said Economics professor Kai Carstensen from Munich's renowned Ifo Institute. "We all at first underestimated the problem."
Pan Pylas in London and Geir Moulson in Berlin contributed to this story.