For a fleeting moment last spring, it was possible to believe that Europe’s economic crisis had turned Angela Merkel into a true believer in the European cause.
Three days after putting up the biggest chunk of a 750 billion-euro ($1 trillion) package to save Europe’s common currency from the Greek financial contagion, the German chancellor gave voice to a set of pro-European musings straight out of the post-World War II dream factory, Bloomberg Businessweek reports in its Oct. 4 issue.
European unity, she said in a May 13 speech, is the “most tantalizing, magnificent, auspicious idea.” Not only must Europe forge a genuinely integrated economy, she declared, but it needs “a common European army.”
Reality soon burst the bubble. Beer-garden rage at the idea of throwing hard-earned German money after bad Greek debt gave Merkel’s popularity numbers a kick. If an election were held today, polls show, Germany’s first woman leader would not win. It’s a reminder that in Germany, which is still straining under the financial and social costs of unification, good deeds that further the cause of Europe offer no political payoff. The people who shattered Europe, then helped rebuild it, like the Continent just the way it is.
“Even in the absence of this crisis, Germany would be placing itself in the camp of the stand-pat, conservative powers,” says Jeffrey J. Anderson, a professor at the Georgetown University School of Foreign Service in Washington. A rebounding economy gives Germany “even less incentive to do anything risky on the European front. The Germans are standing back and saying: We fixed our problems with fiscal rectitude and a sober, conservative approach, and the rest of you ought to be following suit.”
Post-War Leaders
A child of Communist East Germany, Merkel, 56, lacks the emotional roots of the war-scarred German generation that built the European Union to be more than a marketplace. Konrad Adenauer bound Germany to the West in part to protect his country from itself. Helmut Kohl regarded German and European unity as two sides of the same coin--a coin that he made sure was denominated in euros. It is this legacy that Merkel is now struggling to uphold.
Merkel, a trained physicist, had her political awakening when the Berlin Wall fell. Within a year she was in the first all-German government as minister for women and youth, courtesy of Kohl’s eye for eastern talent. Her rise was so quick that she skipped the intensely local politics that gave her predecessors grassroots credibility. She also displayed a ruthless streak. When news broke in 1999 that Kohl had run a slush fund during 16 years as chancellor, Merkel, by then secretary-general of the Christian Democratic Union, publicly denounced her mentor.
Tied to Euro
Now Merkel is bound by the institutions Kohl created: the EU and the euro. As Greece veered toward default and threatened to drag Spain, Ireland, and Portugal down with it, the pressure on the euro drove the equivocating Merkel to rescue the system not because she loves Europe, but because Germany is its leading beneficiary.
While Kohl battled to keep German and European interests in perfect alignment, he was also the consummate domestic political opportunist. He dodged and weaved for months in 1990 before recognizing Poland’s border with Germany as inviolable--the same kind of fence-straddling Merkel was accused of when Greece pleaded for help. And by the end of his tenure in 1998, Kohl, with his treasury buckling under the cost of subsidizing the East, was making idle threats to stop paying into the EU budget.
‘Massively Exaggerated’
So when critics--including many from her Christian Democratic base--expressed outrage over Merkel’s handling of the debt shock, the complaints were “massively exaggerated,” says Horst Teltschik, 70, a Kohl confidant who negotiated German unification. “It would be superhuman to act immediately and know all the answers in such a crisis. Helmut Kohl wouldn’t have done it differently. Just like Chancellor Merkel, he would have been willing to take risks in order to preserve the euro.”
Merkel, the overnight political phenomenon, lacks her patron’s gift for milking a European crisis for gains at home, and now she is paying the price. In May the CDU lost control of North Rhine-Westphalia, Germany’s largest state, and with it a majority in the upper house of Parliament. A rare contested vote almost upended Merkel’s candidate for Germany’s ceremonial presidency. Battles with her coalition allies over taxes stirred talk of a leadership vacuum less than a year into her second term.
The fiscal crisis and cleanup operation confirmed Germany’s preeminence in Europe. It also made the German people even more hesitant to embark on new EU ventures: 53 percent regard the euro as a “bad thing,” according to a June poll by the German Marshall Fund of the U.S.
Reluctant Leader
Merkel is not the only reluctant leader the country has seen. Hesitancy was hardwired into Germany’s postwar politics as the nation did penance for the crimes of the Nazi regime. Its response was to wield power through the EU, in tandem with former archenemy France. That worked as the EU grew from 6 countries in 1957 to 15 in 1995, and it worked for the creation of the euro in 1999. But things are different in today’s larger bloc.
Defeats for German-French projects used to be rare; now they are increasingly common, as when other governments rejected France and Germany’s argument for a European financial transaction tax on Sept. 7. “For a long time the German-French relationship has been much more appearance than reality,” says Guenter Verheugen, 66, Germany’s EU commissioner from 1999 to 2010. “The days are gone when a German-French directorate could set the course of European integration.”
More Than Numbers
It’s not only a numbers game. German and French interests have been drifting apart since the end of the Cold War. As France tapped on the brakes, Germany was the prime mover behind the EU’s expansion to the east, seeing it not only as a moral imperative but as good for business. Eastern Europe bought 11 percent of German exports in 2009, trumping the U.S.’s 7 percent share. The eastward shift in the EU’s center of gravity also reestablished Germany’s buffer zone to Russia.
As doubts swirled around the euro, the French were the first to accuse Germany of having benefited unfairly. Europe’s economic imbalances weren’t due only to peripheral countries living beyond their means, French Finance Minister Christine Lagarde said in March. Germany was also at fault for saving too much, the argument went, spending too little, and getting rich off exports to the rest of Europe.
Export Engine
Merkel bristled at the charge that Germany, by boosting its industrial competitiveness, was winning a zero-sum European game. One prong of Germany’s export model is to invest in factories abroad. Some 64 percent of that investment is in the EU, sustaining 2.9 million jobs, according to Bundesbank data.
“The export model directly benefits other countries,” says Heleen Mees, a researcher at the Erasmus School of Economics in Rotterdam. “It’s very worthwhile for those countries to have German factories and technologies.”
Merkel has won on one point. As the EU tries to strengthen the euro region’s financial management, the onus is on weaker countries to improve how they do things, not on Germany to abandon fiscal rigor and loosen the lid on wages. Yet that’s about the only point she has taken so far. German calls for harsher sanctions on deficit offenders face resistance, and German pleas for an “orderly” default mechanism for debt- swamped countries are going nowhere.
Enthusiasm Wanes
It’s no wonder that German enthusiasm for Europe has soured, with the proportion calling EU membership a “good thing” plunging to 50 percent from 60 percent in an EU poll in May. That attitude underpins a tough German stance against increasing the EU’s annual 123 billion-euro budget. Grand European projects --- such as joint bond issuance or a centralized foreign or immigration policy --- fail to excite a country that, after centuries of strife, is at last satisfied with its place on the map.
While consenting to the EU’s unhurried expansion to the Balkans, Merkel has transformed Germany from being a supporter of Turkish membership to a die-hard opponent. The best Turkey can hope for is a “special relationship,” she said in Istanbul in March. Even in her Europe-of-the-future speech in May, the message was that the EU had enlarged too far and too fast.
What about the Europe of the present? It can look to Merkel’s Germany for crisis management, if not for bold steps that go beyond the status quo. “When the crunch comes and there’s a crisis, Europe takes action,” says Hans Eichel, 68, German Finance Minister from 1999 to 2005. “I’d like to see us make progress not only when there’s a crisis, but day in and day out. For that we need politicians with a passionate commitment, not politicians who just react to crises.
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