Germany could emerge as Europe's leader in 2012 by offering Italy and Spain a way out of the debt crisis - or stumble and draw the continent's anger if other Europeans come to associate it only with an unpopular drive for austerity, the head of the World Bank warns.
Robert Zoellick spoke as the annual Munich Security Conference opened with a discussion of economic heavyweight Germany's role in Europe and beyond - a reflection of the fact that, as conference organiser Wolfgang Ischinger put it, "more than ever, nonmilitary issues are critical to our security."
Germany, which has emerged gradually from its post-World War II diplomatic shell since reunification in 1990 and remains reluctant to flex its military muscle, has largely shaped a response to the eurozone debt crisis criticised by many for focusing too much on austerity.
The biggest contributor to Europe's financial firewalls, it has been resisting pressure to put more money into them - calls that have come from International Monetary Fund chief Christine Lagarde among others. It also has resisted calls for jointly issued debt, or eurobonds.
"2012 could be a year where Germany becomes a leader of Europe or ... it could be the year in which Germany stumbles and draws the ire of Europe," Zoellick said.
Leadership, he said, "would involve charting a course to try to offer support and incentives particularly to Italy and Spain, which are the fundamentally critical countries here, if they apply fiscal discipline and structural reform."
"I'm not saying throw money away," Zoellick added. "I'm saying, make clear in advance the support that they will receive if they act."
The struggles of Italy and Spain with high lending costs are a cause for concern because they are considered too big for the eurozone's financial rescue funds to cope with if they need a rescue.
"If Germany at the end of 2012 is only associated with austerity, and the key countries can't maintain the political support for the economic actions, then Germany could become the target of ire," Zoellick said.
The European Central Bank, which has offered massive loans to banks, has "bought time," Zoellick said, adding that a German-backed budget discipline pact agreed this week is "a good step."
But "it's pretty hard to do fiscal discipline and structural reforms to regain competitiveness if there's no growth," he added. "So there needs to be some opportunity here to give additional support."
German Defence Minister Thomas de Maiziere offered a sceptical response.
"A lot of what you and Ms. Lagarde and others say always sounds good, but among many there is scepticism that it is an excuse to carry on afterward so that we end up back in the situation we are in," he said.
"I think that, without the German approach to date of spreading a culture of stability in Europe, we would not have got as far as we have now; there will still have to be growth and competitiveness."
Polish Foreign Minister Radek Sikorski said that there are limits to Germany's power. Its position in the European Union is that of "the largest shareholder, not a dominant shareholder," he said. "You will need other major shareholders to work with you for you to get your way."
"As we would put it in our part of Europe: don't get too dizzy with success," he said.
