Merkel Holds Ground Against 5 PIIGS, Club Med

Sarkozy Merkel Greece Bailout Deal Photo

“The debate in Germany over Greece is polluting the atmosphere and creating anti-European feeling,” charges former Belgian prime minister Guy Verhofstadt.   “In the space of a few weeks, we are destroying all our efforts to bring Europe closer together,” he laments.

This is indeed a stunning departure from the 1990s, when a reunited Germany was the key force in both pushing for the transition to the EU itself, even sacrificing the vaunted Deutsche Mark to pave way for the Euro.   But those days are over, at least for now.

Stephen Castle and Matthew Saltmarsh report for NYT ("Germany Begins to Shed Its Role as E.U. Integrator") that Verhofstadt is not alone in his concern.

Joachim Fritz-Vannahme, Europe director of the Bertelsmann Foundation, a German research organization that focuses on democratic reform, said that Mrs. Merkel “finds herself in opposition to more or less all of the E.U.”  “In a very prominent way,” he added, “the German government is saying, ‘Our national interest comes first. We behave like all the others do.”’

Germany was historically a main motor of European integration, a project conceived as one of Franco-German reconciliation in the aftermath of World War II.  But leaders of the largest economy in Europe, and therefore the biggest contributor to the Union, began to take a more assertive line more than a decade ago when Chancellor Helmut Kohl was replaced by Gerhard Schröder, a politician from a younger generation.

At times during her period in office, Mrs. Merkel has asserted strong European leadership — on climate change, for example — but today’s crop of issues has prompted a different reflex.

“This is certainly farewell to the Germany of Kohl, which was, at the end of the day, ready to pay with a check for stability within the E.U.,” Mr. Fritz-Vannahme said.

Several factors are at play. Mrs. Merkel’s opposition to some of the targets proposed for the Union’s 2020 economic strategy is based on Germany’s constitutional arrangements. Education, one of the areas identified, is the responsibility of powerful regional administrators, whom Mrs. Merkel wants to consult before striking a deal.

There are stresses, meanwhile, within the new coalition government that have led to deals apparently done by the country’s finance minister, Wolfgang Schäuble, then being undone in Berlin.

But the deeper issues relate to Germany’s economic policy. Fearing that any bailout of Greece could break German constitutional or domestic law — and cost Berlin billions of euros — German support for any emergency mechanism is contingent on others meeting its tough terms. Those terms include a statement that intervention would be a last resort, that the International Monetary Fund would be involved and that there will be new rules to prevent any repeat of the crisis.

One E.U. diplomat, who was not authorized to speak publicly, asserted: “The Germans are saying, ‘We have had 10 years of the euro. What has happened is proof that this is not working.”’

Nicolas Jabko, research director at the Center for International Studies and Research at Sciences Po in Paris, said that different approaches to the Greek issue from France and Germany highlight the two countries’ divergent economic models. While Germany pursues tight fiscal discipline, wage moderation, export and supply-side-driven growth, France has used more consumer demand and deficit spending to post its moderate growth rates.


Mrs. Merkel’s call for the right to exclude countries like Greece actually seems linked to domestic politics before an important regional election in North Rhine-Westphalia in May. Polls suggest that the governing coalition could lose to a liberal combination of Social Democrats, Greens and the Left party.  “Many German electors, themselves constantly asked to do more for salary moderation, don’t see why Germany should aid a country that has never imposed fiscal discipline,” Mr. Jabko said.

That widespread sentiment means that, though she may strike some deals in Brussels this week, Ms. Merkel will do so from a hard-nosed German perspective. “Her argument can be clearly defined as one of national interest,” Mr. Fritz-Vannahme said, “and our national interest is no longer defined as the same thing a Europe’s interest.”

While that may be lamentable from the perspective of Brussels, it’s hard to blame the Germans in general or Merkel in particular for looking to their own interests first.  These aren’t the heady 1990s, when the Germans were euphoric after reuniting with their cousins to the East and reveling in a booming economy.   Add to that the German cultural aversion to debt and the profligacy of Greece and other Eurozone states currently in trouble (the aptly-named PIIGS), it’s no wonder Berlin isn’t in the mood to bite the bullet.

Further, Merkel has a point when she proclaims, "A good European is not necessarily one who offers help quickly. A good European is one that respects the European treaties and national rights so that the stability of the euro zone is not damaged." As Spiegel‘s Phillip Wittrock aptly summarizes:

Germany is no longer interested in carrying on in its role as the EU’s paymaster. The government in Berlin sees the danger that an overly hasty agreement to provide direct financial aid to Greece would set a dangerous precedent that might motivate other countries in the wrong ways. The worry: Reform pressure in other countries would diminish and the move would reinforce the mentality in some countries that if worse comes to worst, they could turn to the EU for a handout, and that others would always be there to help.

The government in Berlin seems little concerned that other countries are now accusing Germany of economic nationalism. Instead, the government sees itself as the true protector of stability in the euro zone, the "trustee of the treaties." The debate over financial aid for Greece, they say, is a question of whether the EU is heading into a fiscal equalization, through direct aid, between countries that would violate the terms of the EU treaties. One could complete that sentiment by stating that Germany, as Europe’s largest economy, does not want to be transformed into an ATM for other European countries with spending problems.

Lorenzo Bini Smaghi, one of six members on the European Central Bank’s governing board, has lashed out at Merkel’s insistence on an IMF role.   But it appears that France is now on board and that President Sarkozy will help Merkel push for such a deal.  Given that there will be no EU-only solution without Paris and Berlin, it’s only a matter of time before it happens.

James Joyner is managing editor of the Atlantic Council. Photo credit: Reuters Pictures.

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