Germany baulks at euro rescue, insists on rules

By Melissa Eddy

Associated Press

Published: Monday, Aug. 15 2011 3:30 a.m. MDT

FILE - In this Dec. 10, 2010 file photo, French President Nicolas Sarkozy and German Chancellor Angela Merkel talk at a press conference during the German-French consultations in Freiburg, Germany. Chancellor Merkel travels to Paris Tuesday Aug. 16, 2011, armed with plans for a new EU body to enforce strict budget limits and fiscal policy and calls for all eurozone nations to enshrine a balanced budget in their constitution.

Michael Probst,File, Associated Press

Enlarge photo»

BERLIN — As Germany emerged from the destruction of World War II, it rebuilt its economy on a system of strong rules governing virtually every aspect of business, from auto manufacturing to competition among regional newspapers.

Today, the German economy is Europe's strongest, a regional powerhouse that its indebted neighbors depend on for billions of euros they need to cope their staggering indebtedness. Germany is insisting that they, too, adopt strict rules before it's prepared to release its money.

Left, right and center, a vast majority of Germans and their leaders believe that the combination of free markets and strict competition controls was the key to their country's economic success.

"At the root of the concept is that you put down the rules and let people have a go, but you don't screw with the rules," said Jackson Janes, Executive Director of the American Institute for Contemporary German Studies in Washington.

"That's a very different attitude that doesn't apply in places like Greece," he said. "It's very difficult to get people to focus on that structure that has worked so well for the Germans."

Germans point to their nation's 3.6 percent growth last year, the strongest in Europe, that allowed them to recover swiftly from the 2009 global downturn as proof.

The belief in "Ordnungspolitik," or "order politics," underlies Berlin's years of repeated demands for the European Union to force restrictions on its members in exchange for German funds to rescue neighbors no longer able to service their staggering national debts.

Those demands will be on display Tuesday when Chancellor Angela Merkel travels to Paris armed with plans for a new EU body to enforce strict budget limits and fiscal policy, and calls for all 17 eurozone nations to follow Germany's example and enshrine a balanced budget in their constitution.

Such disagreements over "order politics" are viewed abroad as having hampered Europe's response to the crisis, spawning long political battles with countries that see strict, unchanging rules as unsuited to their economies. That squabbling has undermined investors' faith in the eurozone's ability to manage its members' debt, and the euro and the continent's stock markets have been hit by seemingly unending turmoil.

When Greece first appealed for help in 2010, Merkel demanded a permanent crisis resolution mechanism before it would agree to loosen its pursestrings, ultimately delaying a bailout.

Germany came under fire for insisting that EU members agree to tougher sanctions for countries that have excessive government debt before endorsing the €110 billion ($157 billion) bailout package.

In the end, Merkel backed down, the aid to Greece went through, the regulations didn't and Germany emerged facing accusations of foot-dragging and tightfistedness. Yet the situation continued to worsen. Within months, there was talk of Ireland and then Portugal needing aid.

In Germany, the move had been an attempt to make the package more palatable to voters who feel they repeatedly tightened their belts after the expensive reunification of East and West Germany in the 1990s, and others should do the same.

After the bailout, German tabloids howled that taxpayers' hard-earned savings were being squandered to bail out a nation viewed as indulgent and lazy. The media were flooded with stories of Greek tax-dodging and corruption.

"Germans are a very disciplined people, this characteristic has also made us masters of export in the global economy," said Peter Walschburger, a professor at Berlin's Free University who specializes in the psychology of economics. "The Greeks, by contrast are governed more by emotion and impulse."

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