Merkel wants us in touch with our inner German housewife


ANALYSIS:EAGLE-EYED READERS will have made an unusual sighting in the letters pages of Tuesday’s edition of The Irish Times.

A reader from Avoca in Co Wicklow expressed her amazement that men needed a fiscal treaty to understand “good housekeeping with budgets – women have been doing this succesfully for years”.

This is the maxim of the Schwäbische Hausfrau, the thrifty Swabian housewife from southern Germany, a figure German chancellor Angela Merkel invokes every time she wants to silence the euro zone crisis cacophony.

Europe has been living beyond its means, she argues, and needs some thrifty Swabian housekeeping and financial common sense to balance budgets. Dr Merkel’s logic, codified in the fiscal treaty, is not far from Margaret Thatcher’s legendary put-down of socialism: eventually you run out of other people’s money.

Irish voters made their fiscal treaty choice on Thursday – either as an expression of agreement with what was being proposed or under the duress of the conditions attached to external financial assistance.

Critics say it does little to address the current crisis and, as proof, point to the fears over Spain’s banks. That, in turn, triggers another round of the Cassandra crisis chorus: what does Dr Merkel want?

There are two answers to this.

The easy answer is that “what does Dr Merkel want?” is the wrong question.

If politics is the art of the possible, Dr Merkel is its unchallenged master on today’s European stage. Throughout the crisis, the German leader has identified what was possible and reverse-engineered her demands to land on target.

Regardless of the issue – bailouts or boosting the bailout funds – the German leader adjusts her course, even initial resistance, to obviate the need for a U-turn.

The latest example involves calls for a growth agenda for Europe: Dr Merkel claims, somewhat disingenuously but not entirely incorrectly, that she has been calling for growth measures since January.

The point is this: what the lady wants is what she thinks she can get – and, then, usually on her terms. If what she thinks she can get shifts – for instance, a change in Europe’s political wind – she simply alters course and claims she always wanted that, while keeping her eye on a long-term path.

This leads to the second, longer answer about what Dr Merkel wants. When the German leader leaves the political stage, she wants to leave behind a European Union that is a real political union – a far more closely linked bloc than the crisis-wracked construct she inherited in 2005. The Germans have a word for it: krisenfest – crisis-proof.

Her officials say there are at least three stages to this process, the first of which is under way: adoption of a fiscal treaty rulebook to manage budgets in exchange for access to the European Stability Mechanism bailout fund, bankrolled largely by Berlin.

A subsequent stage would require even closer fiscal integration of budgets and taxes, with the prospect of jointly issued eurobonds at the end to overcome anticipated resistance in Ireland and elsewhere to ceding tax competences to Brussels.

Another stage is institutional reform, boosting the powers of the European Parliament, transforming the European Commission into an EU government and reshaping the European Council, where heads of state meet, as a second chamber.

It is a matter of some debate between the chancellery and the finance ministry which should come first: institutional reform or fiscal integration.

The logic, though, is evident: if the EU is moving towards joint European liability, Berlin wants a political union in place to control it and, if necessary, pre-emptively prevent another financial disaster.

Crucially, neither Dr Merkel nor Wolfgang Schäuble, her trusted finance minister, have ever denied that, at some point in this process, eurobonds would be the sweetener on offer. Not now, is the official Berlin line, but not never.

Dr Merkel’s strategy is no secret; nor is it particularly controversial in Germany. For all their backing for François Hollande, the opposition Social Democrats (SPD) and Greens are both largely in agreement with Dr Merkel’s long-term road map, though they disagree with some details.

What seems to irritate her critics most is how Dr Merkel analyses and dismisses their arguments, refusing to engage with them.

Listen to Dr Merkel speak in public, or talk to her aides in private, and the unfailing impression is of an unflappable personality, supremely unimpressed by the short-termism of the Twitter age.

“I have a habit of making only the end results public,” she said recently. “It doesn’t always go down well – I noticed recently in a critique that the journalists are not even interested in results, but their genesis.”

It’s not just journalists. One characteristic of the economic crisis has been the men crying wolf, the army of Flash Gordons insisting there are only four minutes to save the euro zone.

All of these economic expert views have been noted in the chancellery, then put in the recycling bin because almost all have one common denominator: unlimited German liability for its euro zone neighbours.

Declining to debate on these issues – whether it is eurobonds today or ESM loans directly to banks – is interpreted by its critics as Berlin’s failure to “get it”.

But what if Berlin does “get it” but just doesn’t want it because it is not convinced it works?

Like her or loathe her, there is no getting around Dr Merkel in the European debate. Some 69 per cent of people polled for this newspaper last week said Germany was the most dominant country in the EU.

Do they think this is a good thing? Published opinion, at least in the English-language media, would be likely to be negative. But what of public opinion?

While the Irish Times poll didn’t ask this question, a survey conducted simultaneously by the Pew Research Centre across eight EU countries (not Ireland) found that despite the barrage of bad press Germany was the most respected country on the continent and Dr Merkel by far the most respected leader.

It will not have escaped her attention that the survey showed German support for assisting countries in need rising in the two years since bailouts began.

Even German public opinion is fluid on the euro zone situation, and Dr Merkel is no stranger to pragmatism if it means retaining power. Adding a growth component to austerity measures – but on her (debt-free) terms – comes just at the right time for her on the domestic front. It will appease her Bavarian allies in next year’s state election while girding her CDU’s centrist flank against the opposition SPD in the autumn 2013 general election.

To get a better idea of where the European debate is going, it is important to understand better what Dr Merkel wants. To achieve this end, there is little point concentrating on where her critics think she should be, nor their lists of proposals to which they complain she says “Nein”.

Experience shows that if the situation changes, and the proposal has merit Dr Merkel can be relied on to move – at the last minute, granted, but not before extracting concessions for her long-term want list for closer European integration. In any other situation, with anyone other than Dr Merkel, that would be considered good negotiation.

Under permanent sniping from around Europe, and with little fanfare, she has shifted the terms of the euro zone crisis debate towards a solution lying in ever closer union. Even with a growth agenda the political consensus remains hers: that a debt problem can be solved not with more debt but rather with sustainable public finances as a requirement for conditional loans that, hopefully, will not be needed.

What does Dr Merkel want? She doesn’t want to make Germans of us, but she does want to advance the European project by putting us all in touch with our inner Swabian housewife.

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