Last month, Jean-Claude Juncker, the Luxembourg Prime Minister, said he was stepping down as head of the eurozone finance ministers at the end of June, citing irritation with Germany and France.
"They act as if they are the only members of the group", he said. Germany has indeed been behaving as though they alone are shouldering the problems of the eurozone, and this has filtered through to the German public which is getting agitated about how "their" money is being used to bail out peripheral Europe.
But of course the Germans arn't the only contributors to the European Stability Mechanism (ESM) bailout funds of E500bn. The official document splits the contributions as follows:
As you can see Germany's contribution is about 27%, and it's easy to understand Juncker's frustration that they wanted 100% of the decision-making over how the fund is to be used.
At the EU summit on June 28th, Mario Monti of Italy finally confronted the Germans, with the backing of Spain and France's new President, Francois Hollande. Monti was not asking for a bailout for Italy - rather he wanted the bailout funds (of which Italy contributes 17.9%) to go directly to Spanish banks to ensure that the banking debt was not taken on by the Spanish government. His view was that German stubbornness in loading sovereigns with debt and then asking them to make drastic cuts was destabalising the entire eurozone, as the markets began betting on a euro-breakup, bidding up bond yields on all the peripheral countries, which in turn was costing them billions in additional interest payments.
His reasoning was that it was cheaper to bail out the banks directly. He is right - risking a euro break-up would cause problems for banks throughout the eurozone, including Germany's. The cost to the German taxpayer for bailing out German banks if the euro fell apart is infinitely larger than their 27.1% share of the ESM bailout fund.
So why has Merkel been so stubborn in the last few months, exacerbating the crisis? The clue is in how the crisis has been portrayed in Germany. By pretending that Germany was shouldering the entire burden, Merkel made a stick for her back. The German press has been full of self-pitying stories about how they were shouldering the entire EU burden and how they were still being punished for WW2 and recommending that they say, "Nein".
In reality, Germany has not paid reparations for WW2 at all, and their contribution to the bailout fund is the same per capita as other member states. Indeed, given that they are richer than states such as Slovenia and Malta, they were getting away scott free in paying the same per head of population - especially as a stable eurozone will most benefit Germany in preventing fallout for their own banks. It's the smaller poorer states like Slovenia and Estonia who should be complaining.
Related article: The Greek eurozone crisis