The drama never ends. The past few weeks have seen another sudden change in the eurozone’s political-economic complexion. Four or five weeks ago, the continent seemed to have established a pretty firm consensus for fiscal austerity. Since then, the government in the Netherlands has fallen over the question of austerity, and elections in France and Greece have all but quashed any such conviction. Street protests in Athens, Madrid and elsewhere have also spoken to the breadth of anti-austerity feeling.
The original emphasis on austerity was always a German stance. Since Germany, Europe’s largest economy and also arguably its healthiest, was destined to carry the burden in any bailout, Merkel’s demand for budget control is certainly understandable. The Danes, the Dutch, the French—then under President Nicolas Sarkozy—and others signed on, either because they agreed with the Germans or because they decided that the appearance of unity was important. The accord, signed late last year, fell short of the “fiscal union” of which some spoke—effectively a eurozone-wide approach to budgeting—but it sought strict rules on the relative size of each member’s deficits and its outstanding public debt. The austerity seekers even agreed to impose fines on nations that violated the rules.