Rare Merkel lapse could cost EU and Greece dear

ANALYSIS:As the euro zone crisis escalated, Ireland came in for compliments as Germany agonised over supporting the plan to bail out the Greeks

FATE FINALLY gave Ireland a break yesterday, after months of bad luck and bad press. After slipping last year from Germany’s pet to bad boy of the European Union, Ireland is flavour of the month once more in Berlin – and for two seemingly unrelated reasons.

Exactly 20 years ago at a crucial EU summit in Dublin Castle, then taoiseach Charlie Haughey won EU agreement to allow East Germany join the bloc when Germany was unified later that year.

Agreement was far from a given: a few months earlier, leaders met to discuss the EU consequences of German unification in Strasbourg at a bad-tempered dinner that descended into what Haughey memorably described as a “tinkers’ row”.

Ahead of Dublin, then chancellor Helmut Kohl promised sceptics that the deal would create a “European Germany not a German Europe”.

After sealing the deal in Dublin, Kohl assured smaller EU member states that they would “not find the EU wallet any thinner because of the East German demands” on Bonn’s finances.

Yesterday, foreign minister Guido Westerwelle said his country would not forget Ireland’s role on the road to German unification.

But the anniversary of that summit, amid claims that Berlin is dragging its feet over helping Greece, has prompted speculation that Kohl’s Dublin assurances no longer apply: that the EU is dominated by a newly powerful but poorer Germany which is neither happy nor able to write cheques to pay for the spendthrift ways of its EU partners.

Into this heated discussion stepped Minister for Foreign Affairs Micheál Martin yesterday. But what could have been a difficult meeting – some Germans mention Ireland in the same breath as Portugal as the next Greece – turned into a pleasant diplomatic coup.

“The example of Ireland shows how ambitious austerity measures and solid structural reforms are the basis for successful crisis management,” said Mr Westerwelle, responding to an Irish Times question on Greece.

The message was clear: Athens should follow Dublin’s example to curry favour in Berlin.

“The better European is not the one who hands over a blank cheque and says ‘here’s the money, we’ve nothing more to talk about’. The better European is the one who makes sure the consequent consolidation takes place in Greece.”

So kudos for Ireland, a little slap for Greece and an attempt to explain Berlin’s line on the crisis: only when the International Monetary Fund and the European Central Bank are happy with Greek austerity efforts and register a need for external funds will the money begin to flow.

So far so good. But why, then, is Berlin getting so much bad press on Greece?

There is a real, palpable public opposition in Germany to assisting Greece: two polls out yesterday showed that between 59 and 65 per cent of Germans are against Berlin aid for Athens.

Add to the mix tabloid papers airing ugly stereotypes about greasy southern Europeans and a rising, long-term German scepticism of the EU project as an expensive, German-financed endeavour.

That has left politicians nervous, none more so than those in the western state of North Rhine Westphalia where allies of chancellor Angela Merkel are struggling to retain power.

Losing power in the country’s most populous state next month – home to one in five Germans – would shift the balance of power in the upper house, the Bundesrat, against Merkel allowing the opposition to block any big political projects.

Beyond that, Merkel has a long, complicated list of people she needs on board for a deal on Greece: the constitutional court, the federal states and the Bundestag in Berlin.

Some observers suggest it is tempting but ultimately misleading to translate public opposition into a lack of political will, or to confuse Germany’s caution on a Greek deal with reticence.

“I don’t think this is about how pro-Europe Germany is, it has more to do with Germany’s overriding imperative to support the euro on a basis that is sustainable and that works,” said Martin. “Put yourself in Germany’s shoes: these are substantial transfers that will occur.”

Even if domestic concerns like the NRW election reflected political concern, which senior Berlin government officials say is not the case, Europe’s largest economy has less interest than any other euro zone partner in seeing the single currency destabilised.

Berlin got off on the wrong foot on Greece by failing to counter effectively the expectation that it would and should spring to action on Greece.

Things have continued in that vein, with a huge failure by Berlin to explain effectively across Europe that it has a well thought-through strategy for long-term euro stability.

“Chancellor Merkel has failed to get the balance right between current and future opinion of a deal,” said Dr Cornelius Adebahr of the German Council on Foreign Relations.

“Taking too little heed of current opinion and how best to calm markets and EU partners is something that will leave a bitter aftertaste.”

By accident, but also by clever diplomacy, Martin has transformed German goodwill towards Ireland from 1990 into 2010 good vibrations for Ireland’s austerity measures.

Now Angela Merkel has to reach out to frustrated partners in Dublin and other European capitals worried that – by focusing on the goal of euro stability – she has taken her eye off the ball of current opinion.

This rare oversight by the German leader has cost the Greeks dearly and could yet harm the very currency she is trying to stabilise.

Derek Scally  is Berlin Correspondent