Europe at the Crossroads

So now we are faced with the dilemma of Greece (and Italy and Portugal and Spain and France and Belgium)and once again we have this discussion of moral hazard and contagion-with a twist. This time it is not the banks that have been playing with the public's money, but rather individual EEC member states with the Union's money as a whole and more specifically with Germany's money. Now we have a real dilemma. Germany evokes strange emotions at the best of times given its' history especially in the context of the last century.
Germany has been plagued by being at the crossroads of Europe with difficult to defend borders and the spectre of war on two fronts and so Germany's wars, though often rightfully viewed as wars of aggression, can generally be understood as a means of trying to solidify its' position geographically and improve its' position economically. Starting with v. Clausewitz's "War is a mere continuation of politics by other means" and realising that a major objective in the first World War was to create a Central European Economical Sphere of Influence, it can be said that Germany acted essentially like many other European powers although generally speaking more efficiently. The Second World War changed this view of Germany and rightfully so. The politics behind this War were abhorrent and there is no excuse or explanation that could ever soften that horror, but one shouldn't forget that one of the main thrusts of the War in the East was to gain Lebensraum, notwithstanding all of my previous comments. My point is not to go into the rights and wrongs of Germany in the 20th century but rather to explain where we are today. Since the Second World War Germany has essentially been an economic powerhouse, helped by an understanding of the weaknesses of the Treaty of Versailles being replaced by the largess of the Marshal Plan. This turned Germany into an economic and importantly non-military power although (West)Germany did join NATO and not coincidentally became the financing engine for the development of Europe at least since the Treaty of Rome. But all this was done without a real political voice. Germany had much to atone for and it was not until the fall of the Berlin Wall, the re-unification of Germany and the creation of the Euro with the Bundesbank as the implicit if not the explicit model for the ECB that Germany has slowly started to develop a political voice to go along with its' economic position.
Now the moral hazard. We are faced with a European crisis that Germany would appear to have the economic might to solve-if the problem were to be contained by "fixing" Greece. If the rest of Club-Med, and France and Belgium are to be bailed out than I question if Germany can handle it. Any number of commentator's now speak of the moral hazard of bailing out Greece- won't that make the others stand in line hat in hand? Some like Mr Roubini's economist suggest the IMF should bail out Greece- Germany is too "interested" a party?-and somehow this would stem the contagion to other European countries that a German solution would precipitate, the precedent Mr Goodhart ex-BOE is so concerned about.
First of all I don't see how an intervention by the IMF would not have the precedent/contagion aspect, unless the suggestion is that the sanctions imposed by the IMF would be so severe that the other European countries with debt/deficit problems would be "forced" to get their finances in line. If that is the argument, then there must be something else driving these comments because it is quite clear that a German-led bailout will undoubtedly come with the same severe conditions although in this case would be a European solution with some strong knock-on effects. The Bundesbank would essentially become the ECB. German economic power would pave the way for German political power which would be another major step to a Federal Europe.
Germany, and therefore Europe stands before a decision eerily reminiscent of the Klein Preussen versus Gross Preussen dilemma. Let's hope politics remain politics. draft