A Germany in leadership mode would acknowledge that more German demand would help its troubled neighbours to export their way out of recession and that there are all manner of reforms (some of which the government is working on or contemplating) that can boost the German economy without 'reducing competitiveness'. Here, Germany would do well to shed its Mittelstandsdenken (the conservative, inward-focused thinking deeply engrained in Germany's small and mid-sized companies) and start behaving like a large country whose actions impact on the eurozone as a whole.
One area, however, in which Germany will not lead is monetary policy. Observers from abroad often call on Merkel "to allow the European Central Bank to buy more Italian and Spanish bonds". It is true that a majority of Germans is against the central bank buying government debt, mainly because they fear that 'free money' will allow South European countries to carry on borrowing, without implementing reforms and austerity.
However, most Germans do not think that they run monetary policy in Europe. They believe in central bank independence. There is no doubt that the ECB operates in a political environment that is substantially shaped by the German debate. But the idea that there could be a direct chain of command from the chancellery to the ECB or even the Bundesbank would be alien to most Germans.
In the eyes of most of the policy people I spoke to in Berlin, ECB bond-buying is dangerous, wrong, illegal ... and inevitable. They know that the German political system cannot quickly come up with the sums that would be needed to finance Italy's borrowing needs for any considerable length of time. First, Germany's post-war political system was constructed specifically to prevent rash decision-making and strong leadership; a slow-moving, consensus-oriented political culture has developed as a result. Second, recent debates about bail-out laws have shown growing political opposition to committing more funds, in particular in Merkel's own coalition. Any attempt to fill a 'big bazooka' bail-out vehicle with German taxpayers' money could lead to political paralysis and early elections.
That only leaves the ECB. Berlin policy-makers shrug off the fact that Germany is routinely outvoted on the ECB board (votes are usually 17 against four). One person close to Chancellor Merkel said he wished the ECB was less hesitant in its bond-buying programme: "They should just announce that they stand ready to buy all Italian bonds, provided certain conditions are fulfilled." Another told me it was "sad" that the Bundesbank and its boss, Jens Weidmann, were so dogmatic. But German leaders are very careful not to criticise central bankers openly and in public.
No German government will instruct the ECB to "buy more bonds". One government advisor says this would only prompt the ECB to defend its independence: "The more political calls there are for ECB intervention, the harder it gets for them to do what needs to be done." Perhaps it is also time for German leaders to acknowledge that their routine statements about the wrongs of debt monetisation unsettle the markets, and just let the ECB get on with the job of stabilising the eurozone.
