Greece | Ten years of »Oxi«: Hard, harder, Mutti

China's rise to global economic power and the US's new geopolitics mean a loss of power and influence for the EU, and thus also for its largest member, Germany. In Europe, the nuclear powers France and Great Britain are renewing their claim to leadership. At the same time, the industrial slowdown and the US tariff war are weakening the position of Germany as an export nation. Things were very different ten years ago: Back then, the euro crisis had shown the world that Europe's stability depended on Germany's financial strength, which enabled the German government to govern the EU.

Who is the most powerful woman in the world? In May 2015, two months before the Greek referendum, the Forbes editorial team had a clear answer: Angela Merkel. In previous years, the US magazine had already ranked the German Chancellor first, calling her the "undisputed head of the EU," "Europe's 'Iron Lady' and the key player in the eurozone's economic drama," who had "mastered existential challenges for the EU."

Merkel, the German government, and German politicians thus profited from a crisis that had begun in the United States. In 2008, the financial crisis erupted there and spread across the globe, as investors worldwide had bet on US mortgage securities. The ensuing recession and the bailout of the banking sector drove up the debts of many countries, making global investors cautious: Which country, the question at the time, would be the first to collapse under its debt burden?

Investors chose Greece in 2010. Not only did it have high levels of debt, but Greece was also confronted with the fact that it lacked its own central bank capable of buying up government debt in an emergency and thus preventing the country from becoming over-indebted. The European Central Bank refused this assistance, which central banks in other countries take for granted. Ultimately, the other EU member states also refused to provide aid to Greece, as the rule at the time was that each eurozone country should be financially independent. Support would "send the wrong signal," said German Economics Minister Rainer Brüderle (FDP) at the time.

The Eurozone saves itself – at Greece’s expense

However, continued investor speculation against Greece and subsequently against Portugal, Ireland, and other eurozone countries gradually threatened the stability of the entire monetary union in 2010. The German government therefore decided to provide aid loans amounting to hundreds of billions of euros to avert a Greek bankruptcy.

These loans saved, firstly, the lenders, i.e., the European banks, which at that time still had over 120 billion euros in Greek loans on their books. Secondly, they saved the euro zone itself, which wanted to protect itself from the consequences of a Greek default. However, they did not save Greece itself, which—like other eurozone countries—was forced to implement an extremely harsh austerity program under German pressure, which cost the Greek economy a quarter of its output.

The Chancellor consistently rejected calls for a softening of the austerity measures: "Harder, harder, Mom," ran the headline in the "Berliner Kurier." At the time, the German government did not base its rejection of a softening of the austerity measures on economic arguments—that the austerity programs were ruining Greece's economy was obvious and undisputed. Nevertheless, from the German government's perspective, these programs were the only option, because it was concerned with demonstrating to the financial markets and the world that Europe was prepared to do anything to restore "stability."

Everyone has to save – except Germany

With pension cuts, mass layoffs, social cuts, and tax increases in Southern Europe, the German government "saved" Europe's creditworthiness and thus underpinned its leading role in Europe. At Germany's request, this austerity program was also made permanent: As a "fiscal pact," the German "debt brake" became a Europe-wide coercive regime that affected Germany itself the least. Because of the global industrial boom and China's economic upswing, the German economy flourished from 2010 onwards, and austerity was unnecessary.

The fact that Germany is now gradually abolishing the debt brake, which was once the only option, demonstrates that debt rules are not practical constraints, but political decisions. At the same time, the German government demonstrated during the euro crisis what it is willing to do to maintain Germany's credit power in times of high debt. This should serve as a warning signal today – also to the German population.