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30th Sep 2022

Poland fears German 'inactivity' more than German power

  • Sikorski: 'The biggest threat to the security and prosperity of Poland would be the collapse of the eurozone' (Photo: Ministry of Foreign Affairs of the Republic of Poland)

Poland has issued an extraordinary appeal to Berlin to do all it takes to save the eurozone, saying that only Germany can manage the task and has a "special responsibility" to do so given its history.

In a speech in Berlin on Monday evening (28 November), Polish foreign minister Radoslaw Sikorski berated Germany for its lack of action, with German Chancellor Angela Merkel widely seen as holding the eurozone's future in her hands.

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"I will probably be the first Polish foreign minister in history to say so, but here it is: I fear German power less than I am beginning to fear German inactivity. You have become Europe's indispensable nation."

Sikorski's words are remarkable for their candour. While there has been much muttering in other capitals about what Germany should or should not be doing, Poland is the first to come right out and say it aloud.

The Polish minister hit back at the dominant political discourse in Germany, which has focussed on the country's budgetary discipline compared to profligate southern countries as well as the potential extra burden to German taxpayers of mutualising eurozone debt.

"We ask that Germany admits that she is the biggest beneficiary of the current arrangements and therefore that she has the biggest obligation to make them sustainable," said Sikorski, adding that because investors are shunning riskier countries Berlin's "borrowing costs have been lower than they would have been in normal times."

He also underlined that Berlin has not always practised the fiscal discipline it is now preaching, having "also broken" the euro's deficit rules while German banks "recklessly bought risky bonds."

In a statement all the more powerful because of the two countries' World War II history, Sikorski noted that Germany has a "special responsibility to preserve peace and democracy on the Continent."

His words come as the eurozone crisis appears to be deepening further still. A poor German sovereign bond auction last week sparked fears that even the EU's economic powerhouse may be engulfed by the debt problems.

Meanwhile, a report on Monday by the OECD, an international think tank in Paris, offered more gloom. It predicted that the eurozone economy would be almost at a standstill (0.2% growth) next year.

"The euro area crisis represents the key risk to the world economy at present," said the report and warned of a "deep recession" if the eurozone collapses.

There have been reports of investors and even governments factoring in such an event. Reuters said Monday that CAP, the world's top broker for foreign exchange and government bonds, has tested its trading systems for the possible return of national currencies.

The UK's Daily Telegraph reported that the British foreign office has told embassies in EU countries to help UK citizens prepare for a scenario in which they cannot access their bank accounts or withdraw cash due to the collapse of the euro.

Several analysts suggest that market fears will only be assuaged if the European Central Bank, with its theoretically unlimited resources, is made lender of last resort.

However, Berlin has been staunchly opposed both on account of potential moral hazard and due to its memories of hyperinflation in the 1920s.

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