The German government proposed last week that a European commissioner be appoint ed to supplant the Greek government.

While phrasing the German proposal this way might seem extreme, it is not unreasonable. Under the German proposal, this com missioner would hold power over the Greek national budget and taxation. Since th e European Central Bank already controls the Greek currency, the euro, this woul d effectively transfer control of the Greek government to the European Union, si nce whoever controls a country's government expenditures, tax rates and monetary policy effectively controls that country. The German proposal therefore would s uspend Greek sovereignty and the democratic process as the price of financial ai d to Greece. Though the European Commission rejected the proposal, the concept is far from de ad, as it flows directly from the logic of the situation. The Greeks are in the midst of a financial crisis that has made Greece unable to repay money Athens bo rrowed. Their options are to default on the debt or to negotiate a settlement wi th their creditors. The International Monetary Fund (IMF) and European Union are managing these negotiations. Any settlement will have three parts. The first is an agreement by creditors to forego repayment on part of the debt. The second is financial help from the IMF and the European Union to help pay back the remaining debt. The third is an agre ement by the Greek government to curtail government spending and increase taxes so that it can avoid future sovereign debt crises and repay at least part of the debt. Bankruptcy and the Nation State The Germans don't trust the Greeks to keep any bargain, which is not unreasonabl e given that the Greeks haven't been willing to enforce past agreements. Given t his lack of trust, Germany proposed suspending Greek sovereignty by transferring it to a European receiver. This would be a fairly normal process if Greece were a corporation or an individual. In such cases, someone is appointed after bankr uptcy or debt restructuring to ensure that a corporation or individual will beha ve prudently in the future. A nation state is different. It rests on two assumptions. The first is that the nation represents a uniquely legitimate community whose members share a range of interests and values. The second is that the state arises in some way from the popular will and that only that popular will has the right to determine the stat e's actions. There is no question that for Europe, the principle of national sel f-determination is a fundamental moral value. There is no question that Greece i s a nation and that its government, according to this principle, is representati ve of and responsible to the Greek people. The Germans thus are proposing that Greece, a sovereign country, transfer its ri ght to national self-determination to an overseer. The Germans argue that given the failure of the Greek state, and by extension the Greek public, creditors hav e the power and moral right to suspend the principle of national self-determinat ion. Given that this argument is being made in Europe, this is a profoundly radi cal concept. It is important to understand how we got here. Germany's Part in the Debt Crisis There were two causes. The first was that Greek democracy, like many democracies , demands benefits for the people from the state, and politicians wishing to be elected must grant these benefits. There is accordingly an inherent pressure on the system to spend excessively. The second cause relates to Germany's status as the world's second-largest exporter. About 40 percent of German gross domestic product comes from exports, much of them to the European Union. For all their di scussion of fiscal prudence and care, the Germans have an interest in facilitati ng consumption and demand for their exports across Europe. Without these exports , Germany would plunge into depression.

Therefore, the Germans have used the institutions and practices of the European Union to maintain demand for their products. Through the currency union, Germany has enabled other eurozone states to access credit at rates their economies did n't merit in their own right. In this sense, Germany encouraged demand for its e xports by facilitating irresponsible lending practices across Europe. The degree to which German actions encouraged such imprudent practices -- since German ind ustrial production vastly outstrips its domestic market, making sustained consum ption in markets outside Germany critical to German economic prosperity -- is no t fully realized. True austerity within the European Union would have been disastrous for the Germ an economy, since declines in consumption would have come at the expense of Germ an exports. While demand from Greece is only a small portion of these exports, G reece is part of the larger system -- and the proper functioning of that system is very much in Germany's strategic interests. The Germans claim the Greeks dece ived their creditors and the European Union. A more comprehensive explanation wo uld include the fact that the Germans willingly turned a blind eye. Though Greec e is an extreme case, Germany's overall interest has been to maintain European d emand -- and thus avoid prudent austerity -- as long as possible. Germany certainly was complicit in the lending practices that led to Greece's pr edicament. It is possible that the Greeks kept the whole truth about the Greek e conomy from their creditors, but even so, the German demand for suspension of Gr eek national self-determination is particularly striking. In a sense, the German proposal merely makes very public what has always been th e reality. For Greece to have its debt restructured, it must impose significant austerity measures, which Athens has agreed to. The Germans now want a commissio ner appointed to ensure the Greek government fulfills its promise. In the proces s, the debt crisis will profoundly circumscribe Greek democracy by transferring fundamental elements of Greek sovereignty into the hands of commissioners whose primary interest is the repayment of debt, not Greek national interests. The Judgment of Athens The Greeks have two choices. First, they can accept responsibility for the debts on the terms negotiated and accede to the constraints on their budget and tax d iscretion whether imposed by a commissioner or by a less formal structure. Secon d, they can default on all debts. As we have learned from corporate behavior, ba nkruptcy has become a respectable strategic option. Therefore, the Greeks must c onsider the consequences of simply defaulting. Default might see them frozen out of world financial markets. But even if they d on't default, they will be present in those markets only under the most constrai ned circumstances, and to the primary benefit of creditors at that. Moreover, as many corporations have found, borrowing becomes more attractive after default, as it clears the way to new post-default debt. It is not clear that no one would lend to Greece after a default. In fact, Greece has defaulted on its debt sever al times and managed to regain access to international lending. More significantly, defaulting would allow Greece to avoid fueling its internal political crisis by forfeiting its national sovereignty. Much of the political c risis inside of Greece stems from the Greek public's antipathy to austerity. But another part, which would come to the fore under the German proposal, is that t he Greeks do not want to lose national sovereignty. In their long history, the G reeks have lost their sovereignty to invaders such as the Romans, the Ottomans a nd, most recently, the Nazis. The brutal German occupation still lives in Greek memories. The concept of national self-determination is thus not an abstract con cept to the Greeks. Its loss plus austerity imposed by foreign powers would crea te a domestic crisis in which the Greek state would be seen as an economic and p

olitical enemy of Greek national interests along with the commissioner or some o ther mechanism. The political result could be explosive. It is unclear if the Greeks will opt not to default. The certain price of defaul t -- being forced to use their national currency instead of the euro -- actually would increase national sovereignty. There will be economic pain if the Greeks continue with the euro, and there will be economic pain if the Greeks leave the euro; the political consequences of losing sovereignty in the face of such pain could easily be overwhelming. Default, while painful to Greece, might well be le ss painful than the alternative. The German Dilemma The Germans are caught in a dilemma. On the one hand, Germany is the last countr y in Europe that could afford general austerity in troubled states and the resul ting decline in demand. On the other hand, it cannot simply tolerate Greek-style indifference to fiscal prudence. Germany must have a structured solution that t o some degree maintains demand in countries such as Spain or Italy; Germans must show there are consequences to not complying with the orderly handling of debt without default. Above all, the Germans must preserve the European Union so they can enjoy a European free-trade zone. There is thus an inherent tension between preserving the system and imposing discipline. Germany has decided to make an example of the Greeks. The German public largely has bought into Berlin's narrative of Greek duplicity and German innocence. Germ an Chancellor Angela Merkel has needed to frame the discussion this way, and she has succeeded. The degree to which the German public is aware of the complexiti es or the consequences of a generalized austerity for Germany is less clear. Mer kel must now satisfy a German public that questions bailouts and sees Greece as simply irresponsible. Capitulation from Greece is necessary for her as a matter of domestic politics. The German move into questions of sovereignty has raised the stakes in the debt crisis dramatically. Even if the Germans simply back off this demand, the Greek public has been reminded that Greek democracy is effectively at stake. While Gre ece may have borrowed irresponsibly, if the price of that behavior is yielding s overeignty to an unelected commissioner, that price not only would challenge Gre ek principles, it would bring Europe to a new crisis. That crisis would be political, as the ongoing crisis always has been. In the ne w crisis, sovereign debt issues turn into threats to national independence and s overeignty. If you owe too much money and your creditors distrust you, you lose the right to national self-determination on the most important matters. Given th at Germany was the historical nightmare for most of Europe, and it is Germany th at is pushing this doctrine, the outcome could well be explosive. It could also be the opposite of what Germany needs. Germany must have a free-trade zone in Europe. Germany also needs robust demand in Europe. Germany also wants prudence in borrowing practices. And Germany must not see a return to the anti-German feeling of previous epochs. Those are severa l needs, and some of them are mutually exclusive. In one way, the issue is Greec e. But more and more, it is the Germans that are the question mark. How far are they willing to go, and do they fully understand their national interests? Incre asingly, this crisis is ceasing to be a Greek or Italian crisis. It is a crisis of the role Germany will play in Europe in the future. The Germans hold many car ds, and that's their problem: With so many options, they must make hard decision s -- and that does not come easily for postwar Germany.