Cyprus bailout: What does it mean for Europe?

The euro crisis is “developing into a struggle over German hegemony in Europe.”

There was relief in Cyprus when the banks finally reopened last week, said Peter Millar in The Sunday Times (U.K.). But there were “frowns in front of television screens throughout Germany as taxpayers watched a Lufthansa flight from Frankfurt deliver $6.4 billion in euro notes to people who days earlier had been calling them Nazis.” Cypriots had taken to the streets shouting anti-German slogans and carrying pictures of Angela Merkel with a Hitler moustache. Their ingratitude is outrageous, said Hugo Müller-Vogg in Bild (Germany). “Without German guarantees, there would be no bailout.” As in previous bailouts of Greece, Ireland, Italy, Portugal, and Spain, Germans are funding by far the lion’s share. Yet once again, “we Germans are the subject of criticism, even outright hatred,” in a country that has catastrophically mishandled its own affairs.

The euro crisis is no longer about money, said Jakob Augstein in Der Spiegel (Germany). Instead, it’s “developing into a struggle over German hegemony in Europe.” Our country’s power is on display as never before in the postwar era. The Cyprus bailout, the first one in which private depositors were directly hit up for some of the losses, was imposed at Berlin’s insistence. German Finance Minister Wolfgang Schäuble decreed that Cyprus’s banking sector, a magnet for suspect Russian money, must be radically slimmed down. This seems like sound economic management. But the truth is that “Germans haven’t just paid for the crisis, they’ve also profited from it.” The euro has been much weaker than the deutsche mark would have been, making German exports cheap. That has contributed to crippling deficits elsewhere in the euro zone, while allowing Germany to amass a large cash pile. If Germany continues to misuse its economic power to bind its European partners “in the shackles of debt,” the long-term consequences will be dreadful.

Subscribe to The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

SUBSCRIBE & SAVE
https://cdn.mos.cms.futurecdn.net/flexiimages/jacafc5zvs1692883516.jpg

Sign up for The Week's Free Newsletters

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

Sign up
To continue reading this article...
Continue reading this article and get limited website access each month.
Get unlimited website access, exclusive newsletters plus much more.
Cancel or pause at any time.
Already a subscriber to The Week?
Not sure which email you used for your subscription? Contact us