Euro crisis – Beware the perception gap

Some commentators in Britain and the US think the Germans are destroying the euro. The Germans think they are saving it. How can that be?

I usually live in London, but I have just spent the best part of a year in Germany. I learnt that the gap between how Germans see the euro crisis and how politicians and analysts in the Anglo-Saxon sphere see it is huge – and it worries me. It makes it harder to find constructive solutions and it unsettles financial markets.

One reason why the Germans see the crisis so differently is that they are simply doing so well. Since the start of the euro crisis in 2010, the German economy has grown by over 7% while much of the rest of Europe has stagnated or has been mired in recession. Unemployment in Germany is at record lows; in countries such as Spain, one worker in four is looking for a job. Not surprisingly, almost three-quarters of Germans told the Pew Global Attitude Survey earlier this year that they were upbeat about their national economy. Only 6% of French and Spanish shared that optimism.

Against this outbreak of rather un-Germanic cheerfulness, it can be hard for Berlin politicians to instil the sense of urgency that would be needed to push through radical measures such as Eurobonds.

What is more, Germans are confused about how much the crisis is costing them. The media often fail to distinguish between actual costs, potential losses and risks. In many a German mind, it all adds up to an enormous bill that already surpasses the country’s capacity to pay. Most Germans rightly think that Angela Merkel and her government are doing a lousy job explaining the crisis.

Since neither the US nor the United Kingdom is in the euro, they are not usually invited to the table when crisis solutions are discussed. With their sometimes shrill insistence on “Eurobonds now!”, some commentators have started to annoy the Germans. As one of Angela Merkel’s advisers told me last year: “I simply don’t read the FT anymore.” That is a shame because useful ideas may fail to get attention in Berlin and Brussels. This is why informal get-togethers of policy-makers and opinion-former such as the Forum’s gathering in Rome next week are so important. We need to close the perception gap.

Author: Katinka Barysch is an expert on European economics, Russia, Turkey, Eastern Europe and questions of energy security. She is Deputy Director at the Centre for European Reform (CER) in the United Kingdom. She was named a Young Global Leader by the World Economic Forum in 2011.

The opinions expressed here are those of the author, not necessarily those of the World Economic Forum.

 Image: Traders are seen working in front of the DAX board at the Frankfurt stock exchange REUTERS/Alex Domanski