Angela Merkel’s legacy at stake as she confronts choice between two disasters

11/7/2015

Whatever happens in Athens and Brussels to resolve the Greek crisis, Germany’s chancellor faces growing criticism at home

By  Kate Connolly

On Friday night, millions of Germans sat down to watch the TV political comedy The Icedancer, about a German chancellor whose husband whisks her away on holiday to escape the stress of conflict in Ukraine and the Greek crisis. On the way to catch their train, she is knocked on the head by a falling signpost and wakes believing she is living in the runup to the fall of the Berlin Wall.

It’s unlikely that Angela Merkel would wish to return to the cold war era. But the chance to turn the clock back to a time before the Greek euro crisis dominated her chancellorship is something she might have relished this past week. The German leader has faced the biggest test of her almost decade-long tenure in the days leading up to last night’s dramatic debate on whether to bail Greece out again or to cut it loose from the eurozone.

The entire future of Europe has appeared to rest on the shoulders of the woman who once said: “If the euro fails, Europe fails” – and might also have added: “And so do I.”

Merkel has faced a decision between two potentially disastrous scenarios. As Artur Fischer, joint CEO of the Berlin stock exchange, puts it: “Either she goes for a third bailout but risks isolating herself domestically in the process – and also faces returning to the same point we’re at now six months down the line and again a year down the line. Or she agrees to a Grexit and, as Greece sinks into more misery with pictures of their plight flashed round the world, she is blamed for that.”

For weeks Merkel has talked more about Greece than Germany. So familiar is she with its politics that Bernd Ulrich, chief political correspondent of the weekly Die Zeit, half-joked that “she could co-govern in Athens any time”.

The Neue Osnabrücker Zeitung summed up in an editorial what it described as the “Herculean task” that has faced her over the past few days. “This is Angela Merkel’s hour. She was the one expected to negotiate between the Greeks and the other euro partners. She was the one expected to find the compromise between the interests of 11 million Greeks and 320 million other inhabitants of the eurozone.”

She will now have to bring the decision made in Brussels back to the Bundestag, where she will find an increasingly rebellious mood in her own conservative ranks, many of whom are seething that she has not pushed for a Grexit. They have also refused to even contemplate a haircut or debt restructuring, which the IMF is insisting upon if it is to remain involved. They all say they are representing the voices of their angry constituents.

And while there is not much doubt Merkel could get a bailout deal of some sort through the Bundestag if she wanted to, thanks to the backing of her junior coalition partner, the Social Democrats, the question remains: at what cost to her?

A revolt within her party ranks could prove critical to her future as German chancellor. She sees her legacy at stake just as there are murmurings that she may contemplate a fourth term in 2017.

In the past days an online petition by the economist Thomas Piketty, which appeals for the German government to grant Greece a debt cut like the one Germany received to help it to restructure after the second world war, has made a huge impact.

That and headlines such as the New York Times one last week: “Germans Forget Postwar History Lesson on Debt Relief in Greece Crisis”, accompanying an article that referred to “German hypocrisy” and a picture of the signing of an agreement that effectively halved West Germany’s postwar debt in 1953, has left some Germans smarting.

They argue that, after so much money has been thrown at the Greek government and so many promises have been made without anything coming back, the comparison is an unfair one.

“There are many cultural differences at play here, including the fact that we Germans hate uncertainty,” says Fischer, of the Berlin stock exchange. “We invent a … standard for everything, including chairs to ensure they will fit under tables, we like that certainty so much, and I always turn up at a meeting on time. Which is why we don’t like throwing money at something, not knowing where it’s going.”

Five years have passed since the crisis began. Half a decade of tense and sluggish discussions with Athens, with leaders whose proposals have never convinced Merkel, and years in which she and her finance minister, Wolfgang Schäuble, have been repeatedly depicted as Nazis. The last straw for Merkel was Greek premier Alexis Tsipras’s announcement of a referendum.

A furious Merkel described Tsipras to the inner circle of her party as “hard and ideological” and declared that he was “steering his country into a brick wall with his eyes wide open”.

Within Germany, criticism of Merkel’s Greek policies has been growing. In Die Zeit, a former German foreign minister, Joschka Fischer, accused her of failing to see the political consequences of the austerity plans and said he believed there was now no solution that would save face for either side. “I blame the German government that it has come to this,” he said. “It didn’t argue or act politically but like a bookkeeper.”

The former Green MP said he would like Merkel to recognise that, as “the cleverer and the stronger” partner, the German government should be prepared to “recognise that its rescue policies thus far have failed”. Why not, he says, offer a debt cut in return for structural reforms?

While she is often referred to as “Queen of Europe”, observers have pointed out throughout this crisis that, in contrast to her mentor Helmut Kohl, Merkel is not a European out of passion but rather out of common sense.

“She knows that Germany’s wellbeing is dependent on living in peace with other countries on the continent, while also operating with them together economically,” says Ludwig Greven, a political commentator. “And this is why she’ll seek a compromise with Greece – however hard that seems to be.”
FIVE YEARS OF MISERY

■ 2009: December

Greece’s credit rating is downgraded amid fears of debt default. The prime minister, George Papandreou, announces heavy cuts in public spending.

■ 2010: April/May

Eurozone countries approve a €110bn rescue package, in return for even more stringent austerity measures.

■ 2011: July

EU leaders agree a major bailout for Greece, channelling €109bn through the European Financial Stability Facility.

■ October

A 50% debt write-off is agreed in return for further austerity.

■ November

Papandreou announces his resignation.

■ 2012: February

Amid violent protests on the streets of Athens, the Greek parliament approves a package of tough austerity measures as the price of a €130bn bailout.

■ March

Greece reaches a “debt swap” deal with its private sector lenders.

■ June

Parliamentary elections boost New Democracy, albeit leaving it without a majority. Leader Antonis Samaras assembles a coalition with third-placed Pasok and smaller groups to pursue the austerity programme.

■ 2013: January

Unemployment rises to 26.8% - the highest rate in the EU.

■ April

Youth unemployment climbs to almost 60%.

■ December

Parliament passes a budget predicated on a return to growth after six years of recession. Hailed as the first step towards exiting the bailout.

■ 2014: March

MPs narrowly approve a big reform package that will open more retail sectors to competition, part of a deal with international lenders.

■ April

Eurozone finance ministers say they will release more than €8bn of bailout funds.

2015: January

Alexis Tsipras of Syriza becomes prime minister and forms a coalition with the nationalist Independent Greeks party.

February

The government negotiates a four-month bailout extension.

■ June

The European Central Bank ends emergency funding. Greece closes banks and imposes capital controls.

■ July

Greece becomes first developed country to miss a payment to the IMF.

■ 5 July

A referendum is held on the bailout. Over 61% vote against the measures proposed by the EU.

■ 10-11 July

Parliament agrees new proposals for a third bailout, imposing tough new tax and spending restrictions. Eurozone finance ministers meet to consider the proposals.

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