“If the euro fails, then Europe fails.”
Time and again during the financial crisis and efforts to bail out Greece, that phrase has been German Chancellor Angela Merkel’s bulwark. In the coming weeks and months she will be measured by her mantra: Will her euro-crisis strategy of the last five years prove viable? Can the euro zone survive if Greece leaves?
German citizens have high expectations for Ms. Merkel’s promises. The firewalls that have been put up around the currency by politicians and the European Central Bank must hold strong if the chancellor is not to fail. In addition to the European Stability Mechanism, ECB President Mario Draghi has promised to do “whatever it takes” to prevent crisis countries like Portugal, Spain or Ireland from being dragged into the abyss again.
In a sense, these firewalls also stand to protect the chancellor’s political legacy.
The success of Ms. Merkel’s bailout policies is verifiable in Spain, Ireland and, with some limitations, also in Portugal. Furthermore, no one still talks about Italy and France as possible bailout candidates, as some did a year and a half ago.
So there can’t be any talk yet of a complete failure of these crisis mechanisms. And yet financial markets will not wait long to attack the euro zone’s stability. They will no doubt test how strong the member states really are.
A good indication of how Ms. Merkel may act in the future is the way she reacted to the financial crisis of 2008 after the Lehman collapse. At the time, Ms. Merkel and her then-finance minister, Peer Steinbrück, guaranteed citizens their savings deposits.