Thomas Meaney and Harris Mylonas: Greece's Crisis, Germany's Gain





[Thomas Meaney is a doctoral candidate in modern history at Columbia University. Harris Mylonas is an assistant professor of political science and international affairs at George Washington University.]

Why did it take four months for Europe's parent nations -- Germany and France -- to prop up the continent's prodigal son, Greece? And what can the European Union do when it comes to coping with such behavior with its other children?

There is little doubt Greece needs to face up to the part it played in its current financial mess -- in which its ballooning deficit threatened the stability of the nation and the euro. But it now appears that in the case of Germany, at least, the slow response was more than meets the eye. Chancellor Angela Merkel was not simply pandering to her fragile coalition and frustrated electorate. Instead, the Greek crisis turned into a three-part opportunity for Germany: The country has dramatically boosted its exports thanks to a weak euro, a German is now the front-runner to head the European Central Bank, and it can now justify cracking the whip on the rest of the Eurozone -- the group of nations that use the euro.

As Europe's biggest exporter, Germany has been hamstrung by a weak dollar and even weaker Chinese yuan. The devaluation of the euro relative to the dollar in the last three months by more than 10% has helped German exports recover from a devastating 19% drop in 2009. While Germany has traditionally been committed to a strong currency, Merkel has been content to let the export sector of the German economy benefit temporarily from the crisis. Call it the Greek stimulus. The old economic tanker is skillfully navigating its course....

One thing remains clear. The parents of the Eurozone want to solve Greece's problem without resorting to the direct -- and embarrassing -- involvement of the International Monetary Fund. In recent years, new EU member states such as Hungary and Latvia turned to the IMF when they needed assistance. But Greece is too close to home. Germany and Greece share the same currency and cannot risk its credibility in the long run.

What hasn't yet shattered the EU just might make it stronger.


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