Germany can't save Europe

To Germans, other European countries must now adjust to new, if unpleasant, realities. Chief among these is that the economies of many European countries are no longer strong enough to support their welfare states. Economic growth is too low, populations are aging and demands on pension and health-care systems are too high. Benefits must be cut or taxes raised without doing too much damage to economic growth or the social fabric.

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It’s a tall order that would be aided by a large and stable source of credit: a rescue fund allowing embattled countries to borrow at low rates while instituting essential policy changes. So far, Europe’s response has been a series of stopgaps, the Spanish loan being the latest.

But Germany is not wealthy enough to anchor such a fund. Together, Italy’s and Spain’s economies equal Germany’s. What if France gets in trouble? Only the United States along with China and other countries with large foreign exchange reserves could create such a fund. That this now seems politically impossible is one measure of global peril.

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