It's been more than two decades since the Iron Curtain fell and Europeans embarked on an ambitious mission to build a powerful economic, political and social union in place of the Cold War divide. And for more than two decades, Germans have been footing most of the integration bill.
Compassion fatigue set in long ago among the continent's most prosperous people, and the mounting costs of keeping the Eurozone intact a decade after the common currency was introduced have all but exhausted Germans' generosity toward their needy neighbors.
In this summer of economic discontent that is rattling financial markets worldwide, commitment to the 17-nation Eurozone has been a hard sell for German politicians whose constituents see only more expense and uncertainty with the wobbly fiscal union. Investors, too, seem to have increasing doubts about the euro's future and European Union leaders' ability to forge a viable plan for managing collective finances.
All eyes are on the European Central Bank this week following the vow of its president, Mario Draghi, to do whatever is necessary to keep Spain and Italy in the Eurozone despite skyrocketing interest costs for servicing their massive debts. The bank is constrained by European Union treaty provisions from loaning money directly to governments, and Germany has staunchly opposed proposals for funneling bank funds to needy member states through mechanisms meant to provide strictly supervised bailouts, not to bankroll loans.
The ECB “is ready to do what it takes to preserve the euro. Believe me, it will be enough,” Draghi assured investors last week, bringing about a short-lived reprieve in the interest rates demanded by lenders for 10-year bonds to finance Spanish and Italian debt.
"After Draghi's comments, expectations are quite high that the central bank will take action Thursday. But at the end of the day, the ECB cannot solve this problem," said Keith Savard, senior managing economist at the Milken Institute in Santa Monica.
The ECB can fiddle with collateral requirements and the refinance rate for some short-term relief, but what is needed to restore confidence in the euro is coordinated fiscal strategy and collective guarantees that new loans will be repaid, Savard said. It will take years, he noted, to execute the necessary legislation and treaty revisions once agreement is reached, which appears far from imminent as Germany and other Northern European euro users resist exposing their own good credit to the dodgy finances of some of their neighbors.
Uri Dadush, director of the international economics program at the Carnegie Endowment for International Peace in Washington, sees some progress -- "glacial," he said -- toward stabilizing the euro since May, when Greeks voted out the political coalition committed to the euro. Greeks managed to seat a pro-euro government in a second election in June, but they have yet to adopt the belt-tightening measures needed to get vital bailout funds due in August.
"There is urgency -- you see this in the volatility of the markets. But is catastrophe imminent? I don't think so. People know the ECB is there and, when push comes to shove, that the ECB will intervene," said Dadush.
Despite the barriers to direct lending to governments by the central bank, Dadush said it has managed to buy up at least $246 billion in government bonds at below-market interest for heavily indebted euro countries.
"Rules are there to be broken once the politicians decide this is what needs to be done," he said.
German resistance may also be broken, if the crisis escalates and threatens to further damage the market for Germany's cars, technology and other exports, said Fabian Zuleeg, chief economist at the European Policy Center in Brussels.
He is critical, though, of the German government's failure to make a strong case to its citizens about the benefits of preserving the currency union and moving forward with deeper financial integration.
"It's not a very positive way of engaging your citizens when you are scaring them into a situation where you say they don't have a choice," Zuleeg said.
All three economists interviewed Tuesday observed that Washington could help stabilize the euro if it were to buy the bonds of struggling states, demonstrating confidence in the currency that would inspire China, Japan, Brazil and other big economies to do likewise. They also agree there is virtually no chance that will happen, given the United States' own debt issues and a presidential election underway.
U.S. Treasury Secretary Timothy F. Geithner in effect confirmed Tuesday that the euro crisis would be left to the Europeans to resolve.
"This is completely within their financial ability to solve," Geithner said at a Los Angeles World Affairs Council event, although he acknowledged that the politics of the problem may be a more difficult sell.
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Photo: German Finance Minister Wolfgang Schaeuble, left, meets Monday with U.S. Treasury Secretary Timothy Geithner at a vacation home on the North Sea island of Sylt, where they discussed the outlook for tackling the Eurozone debt crisis. During a Los Angeles visit Tuesday, Geithner made it clear that the euro woes were a matter for Europeans to resolve. Credit: Philipp Guelland / Associated Press