Germany to Europe: Don't criticize us on eurocrisis leadership

The euro crisis: It sounds like an arcane finance story. But as Germany sets the tone and the rules, the crisis has great meaning for Europe's future. Germany's foreign minister calls it a "defining moment for the image of the European Union." Critics say German is a bully, twisting Europe's arm with an austerity regime that will bring subservience. Is it a new era of the strong versus the weak? Below is an effort to voice the German consensus that supports a "German doctrine." To read a case made against it – reported from Berlin, Paris, and London – read here.

Amid Europe's most serious economic crisis since World War II, Germany has taken the lead. Berlin insists on austerity as a way to reform debtor nations and as a price tag for bailouts worth billions. European nations en masse are signing up to live within their means.

On March 2, German Chancellor Angela Merkel got 25 of the 27 European Union nations to agree to hard-wire fiscal discipline and debt limits into their national laws – a quiet shift with historic implications.

German officials realize the subject is touchy. Across Europe, there's a new antipathy toward Berlin. But Germans are confident that their model of austerity will work for the rest of Europe, just as it has for them. Here is a composite picture of what they say:

The world criticizes Germany for being strong, but not leading, in the euro crisis. Now, as we start to lead, we are criticized, if not demonized. We are called selfish or Nazis. But if we are to lead, we want to use our experience, our rules, and our models. That means an austerity policy favoring price stability and cutting debt. And we don't want to be rushed; we have domestic political hurdles to surmount. German voters don't want to pay for others' excesses. They were told when Germany joined the eurozone that they would not have to bail anyone out. This is basic.

Our approach stresses responsibility and competitiveness. We keep wages low, build quality products, and export them for cash. We do not take a Keynesian view of stimulus; we rely on the neoliberal school of Hayek. Our distinctive German model emerged after the war from something called ordoliberalism, which stresses clear rules and fiscal rectitude. ("Ordo" comes from the Latin word for "order.")

We are suspicious of the Anglo-Saxon model that has brought a global morass of financial instruments, debt, and excess. Washington and London are not our fiscal ideals. We take seriously the problem of moral hazard, where money is loaned with no guarantee of payback. Greece, which borrowed, spent, and hid its balance sheets, is a poster child for this hazard. The new EU "fiscal compact" agreed to in January will ensure it doesn't happen again. Germans can't afford to be left holding the bag for the rest of Europe. Germany is strong, but it is not that strong.

Yes, some of our private banks may have been caught up in the Anglo frenzy of lending before the 2008 financial crisis. Some still have exposure to outside debt. But we are fixing that.

It is folly to believe Europe can continue with high wages and debt without basic change. The rest of the world has jumped up and down asking for bigger and thicker fire walls of cash to reassure markets. Christine Lagarde, head of the International Monetary Fund, just came to Europe, again with that request. But fire walls are not our approach. We don't believe in solving a debt crisis by piling up more debt. The government cannot buy its way to growth. Nor do we advocate talking loudly and publicly about the crisis. We want to quietly address problems. We've already created a new fiscal union with tighter rules. Austerity needs time to take effect.

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