Germany and America Clash Over Debt Crisis

German Finance Minister Wolfgang Schäuble has firmly rejected an American plan to tackle the euro crisis by using loans from the European Central Bank to expand the European Financial Stability Facility (efsf) from $440 billion to $2 trillion.

“The multitrillion package now taking shape for Euroland was largely concocted in Washington, in cahoots with the European Commission, and is being imposed on Germany by the full force of American diplomacy,” writes the Telegraph’s international business editor Ambrose Evans-Pritchard.

Germany is having none of it. Schäuble smacked the plan down September 27, saying, “I don’t understand how anyone in the European Commission can have such a stupid idea.” Ouch. He continued: “The result would be to endanger the aaa sovereign debt ratings of other member states. It makes no sense.”

U.S. President Barack Obama told a public meeting in California that the euro crisis is “scaring the world.” European leaders “are trying to take responsible actions but those actions haven’t been quite as quick as they need to be,” he said September 26.

Schäuble dismissed his comments, saying, “It’s always much easier to give advice to others than to decide for yourself. I am well prepared to give advice to the U.S. government.”

Schäuble’s tumid words were partly driven by the fact that the German parliament was due to vote on the expansion of the efsf’s powers on September 29. If members of parliament had thought the bailout mechanism was about to be expanded again, they may have voted no.

Nonetheless, Schäuble’s put-down is bold, to say the least, especially considering that the United States is keeping Europe’s banks afloat.

Then again, the U.S. is also being audacious pushing Europe toward a strategy that is failing in America. Germany will not be moved. Printing and borrowing money cannot solve any crisis. In the long run, German stubbornness will pay off.