Sean O'Grady: Germany's dilemma: protect the euro or her own prosperity

This is a case where both sides are right. The Americans are right to point out to the Germans that the corollary of the southern Europeans trying to fix their economies and boost their exports is for Germany to buy more from them. It would help the Spanish borrow less if the Germans could borrow some more, and thus boost the whole European economy.

Germany's budget deficit is modest, at 3 per cent of GDP (ours is 10 per cent), and there is not the same need to repair her public finances. Germany is already paying to rescue Greece and Spain one way, via costly bailouts; a more pleasant way might be to spend the money on their tasty exports. In the 1970s Helmut Schmidt's Germany was happy to play "locomotive" to pull weaker economies out of a slump.

Yet the Germans are also right to argue that they cannot be expected to reverse labour market reforms and voluntarily destroy their competitiveness just because that is what the Greeks did. Germany cannot be expected to artificially create inflation when it has historically spawned such evil. The upshot is that Germany has a choice: protecting the euro and the European project, or her own prosperity. She cannot have both.