Angela Merkel – is the Greek crisis too big for Europe’s most powerful woman?

Germany’s chancellor could secure her place in history – but by risking the wrath of her own voters


Angela Merkel has recently been making much use of the old cliche, “Where there’s a will, there’s a way”. She has rolled it out to Alexis Tsipras and the Greek people, and David Cameron has heard it fall from her lips at least once – because, of course, she knows all too well that a Greek exit from the euro would hardly bolster Britain’s enthusiasm for the European Union.

The Greek crisis is the biggest challenge Merkel has had to face in the 10 years of her chancellorship. If Greece had to exit the single currency, Merkel would go down in history as the one politician who had the power to stop the EU’s decline but failed to do so. Some experts believe that to a large extent she contributed to the crisis: had she wholeheartedly backed a full bailout in 2010, the collapse of the Greek economy might have been averted.

Instead, Merkel involved the International Monetary Fund – against the advice of her finance minister, Wolfgang Schäuble. Those well disposed towards the German chancellor say she brought in the IMF to prevent Greece from putting the European commission under too much pressure. But at least as important is the less flattering interpretation: that the most powerful woman in Europe (if not the world) shied away from taking sole responsibility for Greece’s fate because sharing it out among as many players as possible was a way of protecting herself from any blame.

Unlike her mentor, the former German chancellor Helmut Kohl, Merkel did not embark on her political career with much instinctive passion for the European project. During her childhood in the GDR, her mother’s praise of the west coloured Merkel’s view of the world – but the west then was the United States. Realising that the EU is worth every political effort has been something she has had to learn. Added to the reticence with which Merkel approaches any momentous decision, it is easy to see why the German government did so little to nip the Greek crisis in the bud.

Acting in unison, the German leader and her finance minister, the IMF, the European commission and the European Central Bank forced an austerity programme on the Greek people based on the principles of neoliberal economics. In the former eastern bloc states such shock therapy had succeeded in returning struggling economies to growth. However, it generated immense hardship and created profound social divisions: the well-off benefited because investments became cheaper, but the bulk of the population suffered.

In the case of Greece, private creditors in Germany have by now been able to write off most of their investments in return for tax reductions. Many others got their money back, plus interest, through official financial help for Greece. Accordingly, the belief has grown among some German finance experts that there is no need to keep Greece in the euro at any price. They regard Schäuble as their champion. And indeed, as early as 2011, the powerful Christian Democrat politician suggested to his Greek equivalent, Evangelos Venizelos, during a meeting in a Polish hotel bar that Greece would be better off without the euro.

Berlin has lately been awash with rumours of a rift between the chancellor and her finance minister. According to this narrative Merkel would move heaven and earth to keep Greece in the euro as a means of stabilising both the eurozone and the wider EU. Schäuble, the guardian of German savers, would be sanguine about a Greek exit, since he is not interested in geopolitics.

But this is bogus. It should be remembered that in 1992 Schäuble, as the CDU/CSU’s parliamentary group leader, was an enthusiastic supporter of the Maastricht treaty, which provided the legal underpinning for currency union. Its rules also opened the way to a future political union. Schäuble was a convinced European long before East Germans like Merkel began to discover “Europe” as an idea. Of course, he too wants Greece to stay in the eurozone. But he has to exercise rhetorical pressure. How else can Germany convince Greek politicians to reform their chaotic finance and tax system?

According to insiders, Merkel and Schäuble are not happy with media coverage of their alleged disagreement. At the same time, portrayals of the pair as good cop/bad cop are useful in the negotiations with Athens.

What is true is that Greece has become a major domestic irritant for Merkel’s Christian Democrats. Clearly, the big fear in the party and beyond is that German taxpayers will end up footing the bill. Therefore some conservative members of parliament will almost certainly vote against another bailout package. Even the Social Democrats, part of the governing grand coalition, have begun to insist on fiscal prudence to protect the German taxpayer. Their leader, Sigmar Gabriel, the deputy chancellor and economy minister, recently claimed there was no need to keep Greece in the eurozone “at all costs”.

Among Germany’s Mittelstand – its medium-sized businesses – there is also criticism: in the past Greece benefited from European subsidies and cheap credit, they argue, but that day has gone. One financial expert reckons the onus is now on Germany to choose: “Either we view Greece as a tourist destination. Or we accept that things are done differently in the south, all concomitant inefficiencies included, and we pay for it.”

That last option would inevitably mean the EU becoming a “transfer union”, in which northern Europe’s fiscally conservative nations resign themselves to subsidising the poorer states of the south in the interests of cohesion and neighbourliness. This may be a reasonable idea, but it can only work if countries like Greece manage to organise a functioning fiscal and administrative system. But this is for the future. For now, Greece’s crippling debt burden can only be solved by a substantial write-off. The big question that remains for all European governments, but specially for Merkel, is whether such a solution is domestically acceptable.

The chancellor is known to rely heavily on opinion polls to guide her political decisions. For example, in 2003, at her party’s convention in Leipzig, Merkel suggested a harsh economic reform programme. When it turned out that a majority of the public did not share her enthusiasm for austerity, she performed a U-turn. Similarly, after the Fukushima catastrophe in 2011, the aficionado of nuclear technology embraced alternative energies within days. Increasingly, her style of government has been described more as unguided opportunism than shrewd pragmatism. German media of all political shades have mocked her for the zeal with which she has pursued one political goal: staying in power. Yet her attempt to defuse Europe’s other big existential crisis – Ukraine – has been useful. Now at Europe’s hour of need, might she consider the Greek crisis too big to leave to the opinion polls?

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