Germany taking nationalist route on Greece issue

Ruling coalition is losing support in the polls, say analysts

AFP
22 March 2010

As Europe looks to Germany for answers on how to bail out debt-stricken Greece, Berlin has become ever more willing to defend its national interests rather than toe the European line, analysts said.

In recent days, Germany has moved away from promoting a European-led solution to Greece’s fiscal woes, preferring instead for the International Monetary Fund to intervene if necessary to provide emergency funds.

And earlier in the week, Chancellor Angela Merkel ruffled feathers and riled markets by insisting that the 16 countries that share the euro needed a mechanism to expel a nation from the club if it persistently breaks the rules.

‘It’s clear that German policy is becoming a bit more geared towards national interests,’ said Sabine von Oppeln, a political science professor at the Free University of Berlin.

Thorsten Polleit from Barclays Capital agreed that German voters were tired of being Europe’s cash cow.

‘I think people are pretty much fed up,’ he told AFP.

But Germany’s increasingly firm stance has prompted outrage from some European politicians.

Guy Verhofstadt, former Belgian prime minister, now leader of the Liberal Party in the European Parliament, said that Ms Merkel no longer seemed interested in finding European solutions to European problems.

‘This is not the Europe that we have been building for centuries. This is not the Europe that was supposed to replace war with cooperation and solidarity’ he said in Brussels.

Even France, traditionally Germany’s closest ally in Europe, has become frustrated, with Finance Minister Christina Lagarde telling Berlin to reduce its dependence on exports to help pull Europe out of recession.

This received a slap down from Ms Merkel.

‘Where we are strong, we will not give up these strengths, just because more of our export products are bought than products of other countries,’ she told Parliament.

Europe should not take its lead from who is slowest, she added. ‘Instead, it should look at who is fastest and best.’

The end of Germany’s love affair with Europe and the euro was reflected recently by a poll in the Bild am Sonntag weekly showing nearly half of voters would welcome a re-introduction of the mighty Deutschmark if the euro weakened.

Privately, German officials say that Berlin is worried that any aid to Greece would face legal challenges in its top court and that losing such a challenge would be disastrous both domestically and at a European level.

But other analysts said that Ms Merkel’s tough stance was driven by domestic politics.

With her ruling coalition losing support in the polls, the chancellor is thought to have one eye on a key regional election in May and is acutely aware that helping Greece is unpopular with voters.

Daniel Gros, director of the Centre for European Policy Studies in Brussels, said that Ms Merkel’s threat to remove a country from the euro club was ‘purely for domestic consumption’. ‘It’s an absurd suggestion. It’s all about domestic politics.’

The director of the Macroeconomic Policy Institute (IMK) in Germany, Gustav Horn, agreed, saying that Ms Merkel’s idea of kicking a country out of the euro area ‘reflects more the mood among the German population rather than a rational suggestion’. And there were signs over the weekend that Germany has not completely closed the door on European help for debt-stricken Greece.

Finance Minister Wolfgang Schaeuble said that Germany would not object to European countries providing bilateral assistance to Athens as a last resort, in comments slated to appear yesterday in the Bild am Sonntag newspaper.

‘In case of extreme necessity, there could be coordinated bilateral aid on a voluntary basis,’ he said.

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