With Greece at the brink of insolvency, Germany balks DOUG SAUNDERS LONDONâ From Tuesday's Globe and Mail Published Monday, Sep. 12, 2011 8:42PM EDT Last updated Monday, Sep. 12, 2011 8:53PM EDT As Greece teeters on the edge of insolvency this week, worries about Europeâs ability to hold its currency union together have shifted from a debt-crippled Greek economy to a German government that appears to be withdrawing from its economic responsibilities. News on Monday that Greece is within weeks of running out of cash, and that Berlin is increasingly willing to allow Athens to fail, sent both the euro and European markets tumbling, with the German DAX down more than 2 per cent, Franceâs Cac falling 4 per cent and the euro falling to a 10-year low against the yen. MORE RELATED TO THIS STORY Greece's debt woes have Merkel pleading for patience Premarket: Roiled by Greek debt default fears Streetwise Video: Europe in crisis? VIDEO Greek default worries hit markets Greece is preparing last-ditch emergency measures this week, including a one-shot property tax, in a desperate bid to prevent an insolvency when the country runs out of cash in mid-October, and appears unlikely to meet the conditions for its next emergency loan. Berlin has chosen this awkward moment to become embroiled in a highly charged political crisis over its response. The shift was signalled on Friday, when Gunther Oettinger, the top German representative in the European Union, proposed that a bureaucratic invasion force be sent from Brussels to Greece to seize the struggling countryâs assets âwithout regard to resistance.â (Mr. Oettinger also suggested that Greece and other debtors be forced to fly their flags at half-mast in Brussels.) Berlin papers characterized the proposal as a UN-style âblue helmetâ operation; Greeks likened it to Germanyâs Second World War invasion. The same day, the German representative on the European Central Bank resigned, apparently in protest against emergency bailout purchases of troubled countriesâ bonds. Most economists agree that far more such purchases are needed to stabilize the euro â along with a far looser interest-rate policy, something Germany has also resisted. Then, on Sunday, officials close to Chancellor Angela Merkelâs Finance Minister, Wolfgang Schauble, suggested the forced âdrachma-izationâ of Greece â removing the country from the 17-nation euro bloc and reverting it to its former currency â was a plausible solution, even though such a move at this moment would devastate Greece and its neighbours and damage European banks. On Monday, Ms. Merkelâs Economy Minister, Philipp Rosler, said âan orderly bankruptcy of Greeceâ should be considered â a day after Greek Prime Minister George Papandreou stood up to 20,000 protesters and vowed to do everything necessary to keep his country in the euro. It is now apparent that many German leaders have given up on the project of keeping the euro together. This is deeply inconvenient timing, at a moment when most economists agree that any stable solution to the euro would require a far deeper engagement by Germany and other major economies, including big initiatives to share debt and fiscal instruments with their euro zone neighbours. âIt is not very helpful if German government members start talking out loud about a Greek insolvency,â the German edition of the Financial Times warned on Monday. âEven those members of the coalition who are skeptical â¦ should have realized by now that such debates produce exactly the opposite of stability in the euro zone.â While Ms. Merkel made efforts on Monday to tone down the increasingly hostile rhetoric of her colleagues, the core issue remains her governmentâs lack of political will. It is a problem that has persisted from the beginning, when Europe issued a â¬110-billion bailout to Greece early last year. Germans, and sometimes also French, insist on seeing the crisis as one of irresponsible southern countries imposing themselves on their wealthy neighbours. By choosing to punish Greece rather than helping build a sustainable economy within the 17-nation currency union, Ms. Merkelâs colleagues would be denying their own deep responsibility in the crisis. From the beginning, Germany used the initial strength of the deutschmark to position itself as the chief exporter and lender to its poorer neighbours, creating a situation where debt and obligations were piling up in the periphery. Greece will never be able to escape the cycle of deepening debt and austerity measures until it is able to return to economic growth, or at least to stability. Instead, the opposite is happening: Rather than contracting by 3.8 per cent this year â the number upon which bailout plans were based â Greeceâs economy is projected to plummet 5.3 per cent. The large and patient investments required to turn Greece around would allow Mr. Papandreou to finish restructuring the economy without facing an immanent collapse. They would shore up the finances of neighbouring countries and reassure investors. And they would stabilize German banks and allow the euroâs members to find a path to stability and recovery some day. âWhat was ignored for 10 years canât be fixed overnight,â Ms. Merkel said Monday in a moment of considerable wisdom. âThat means that we have to be patient.â But, in general, large and patient investments are falling away from Berlinâs vision. The mood has turned to quick and decisive punishments, damn the consequences.