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The Chancellor's euro predicament

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The Chancellor's euro predicament

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As the euro crisis deepens Germany, and in particular, Angela Merkel are coming under mounting international pressure to do more to tackle it. The Chancellor embodies her country’s rejection of the remedies advocated by the markets and her European partners – ECB intervention and the creation of eurobonds.

Such measures meet strong opposition in Germany’s upper and lower houses of parliament, and would even require constitutional court approval.

Even if she were to do a sudden about-turn, she has little room to manoeuvre on the domestic political front. So, the Chancellor, it appears, is not for turning.

But with a euro meltdown looming, that is not what the rest of Europe wants to hear.

In and address in Berlin Polish foreign minister, Radoslaw Sikorski said: “The biggest threat to the security and prosperity of Poland today would be the collapse of the euro zone. And I demand of Germany that, for your sake and for ours, you help it (the euro zone) survive and prosper. You know full well that nobody else can do it.”

To find out more about about Germany’s role as the so-called saviour of Europe our business reporter Stefan Grobe spoke to Claudia Kade, the Berlin correspondent of the Financial Times Deutschland.

euronews:

Claudia, you write about the chancellor every day. The pressure on her from her European partners and financial markets, is getting greater and greater. We’ve seen her say ‘no’ many times, and that ‘no’ gradually morphs into a yes. Will that happen with eurobonds as well?

Claudia Kade:

I think this is very likely. The only question is, when will Merkel give in on that. She has moved herself into a dead-end street. At the European summit next week, she wants her colleagues to adopt tougher austerity rules and Treaty changes. In order to get approval, she’ll probably have to make concessions to the other countries who want eurobonds or who want the ECB to provide unlimited funds to use for the rescue of the euro.

euronews:

How strong is Merkel’s position domestically? Has she sufficient support from her government and from the population?

Claudia Kade:

Yes, for the time being she has that support. Her approval ratings have even risen over the summer months. I have the impression that she is now determined to be more assertive and to accept a leadership role in Europe – something she had long hesitated to do. But her strong approval ratings depend entirely on her tough stance on the crisis. If she caved in on eurobonds or on a stronger ECB role of providing unlimited funds, then the situation could change rapidly. Her support among the population, as well as in her own government, might quickly evaporate.

euronews:

Talking about the coalition, Merkel’s weak but essential coalition partner, the Liberals, have organised a party referendum in mid-December on Merkel’s euro rescue strategy. What happens if there is a majority against that policy? Will the Liberal ministers leave the government? What happens then?

Claudia Kade:

This is a huge risk, indeed, that Merkel is taking. That’s why the EU summit next week will be so difficult for her, as she keeps in mind that her coalition might actually collapse, if members of the Liberal Party reject her euro policy. The party’s president, Philipp Rösler, has already said that he would respect the will of party members. In case of a no vote, he cannot seriously continue to be member of the government. So, in Merkel’s chancellery, scenarios are developed on what to do in that circumstance. One possibility is forming a national unity government which would include all parties. Decisions could then be taken on a case-by-case basis. Early elections are something Merkel wants to avoid, for, as polls suggest, the Social Democrats and the Greens would likely be able to take over.

euronews:

It is clear that, at the moment, all European governments have little room to manoeuvre. What would a social-democratic chancellor do differently?

Claudia Kade: Well, that’s interesting. A social-democratic chancellor would act much differently. Maybe, he would have helped Greece earlier and would have provided rescue funds not as hesitantly as Merkel. But in the meantime, even within the ranks of the Social Democrats, there are important voices that reject eurobonds as well. Let’s also remember that the rescue fund EFSF was adopted by the Social democrats in the Bundestag as well. So, the bottom line is that there are no big differences between the Christian and the Social democrats on that matter.