Mon, Jun 29, 2015 page9

• Is the Greek crisis too big for Europe’s most powerful woman?

  • By Franziska Augstein / The Guardian
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  German Chancellor Angela Merkel could secure her place in history, but by risking the wrath of her own voters, she 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 Greek Prime Minister Alexis Tsipras and Greeks, and British Prime Minister 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 EU.

  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 IMF — against the advice of German Minister of Finance Wolfgang Schaeuble. Those well disposed toward the German chancellor say she brought in the IMF to prevent Greece from putting the European commission under too much pressure. However, 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, 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 German Democratic Republic, her mother’s praise of the West colored Merkel’s view of the world — but the West then was the US. Realizing 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 program on Greeks 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 Schaeuble 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 rumors 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 stabilizing both the eurozone and the wider EU. Schaeuble, the guardian of German savers, would be sanguine about a Greek exit, since he is not interested in geopolitics.

  However, this is bogus. It should be remembered that in 1992, Schaeuble, as the Christian Democratic Union bloc’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. Schaeuble 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 Schaeuble 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 are likely to 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. German Minister of Economic Affairs and Social Democratic Party leader Sigmar Gabriel recently said 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 say, but that day has gone.

  One financial expert said 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,” he said.

  That last option would inevitably mean the EU becoming a “transfer union,” in which northern Europe’s fiscally conservative nations resign themselves to subsidizing the poorer states of the south in the interests of cohesion and neighborliness. This might be a reasonable idea, but it can only work if nations like Greece manage to organize 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 especially 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 program. When it turned out that a majority of the public did not share her enthusiasm for austerity, she performed a U-turn. Similarly, after Japan’s Fukushima Dai-ichi nuclear power plant disaster 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?

  Franziska Augstein is a journalist and editor at the Suddeutsche Zeitung.
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