Damage control Merkel Missteps Over Greece

Faced with growing hostility to Athens at home, and a defiant “no” vote in Greece, Chancellor Merkel faces the greatest challenge of her chancellorship.
That didn't go her way - the Greeks said "No."

On Monday night Angela Merkel flies to Paris for talks with French president Francois Hollande, attempting to keep both the euro zone and her own reputation intact.

Ms. Merkel and her combative finance minister, Wolfgang Schäuble undoubtedly share some of the blame for the fact that Greece is in crisis.

Euro zone leaders are now scrambling to find a response to the Greek vehement “no” in the referendum on Sunday. Ms. Merkel’s tactic last week, not to speak with the Greek government until after the vote, was obviously a hope that a “yes” would rid them of the troublesome Greek prime minister, Alexis Tsipras, and his radical Syriza party for good, looks like a mistake.

The Greek people decided instead to exercise their vote on Sunday, by rejecting their bailout conditions by a resounding 61.3 percent.

Ms. Merkel appears to have been banking on the assumption that the Greeks, cowed by capital controls and the risk of a Grexit, would vote “yes” and their radical left prime minister would be forced to resign.

But it looks as if the chancellor, frequently described as the most powerful politician in Europe, has uncharacteristically miscalculated. Now she has to balance the danger to the euro zone if Greece does go, with the very hostile feelings both within the German public and her own party to making concessions to Athens.

The Greeks, whether just more angry than scared, or persuaded by the Syriza line that a "no" would strengthen their hand, have not played ball.

The way the euro crisis was dealt with, putting forward a policy which is sold to the public as being without alternatives…and not offering space for political debate about it has certainly disillusioned many parts of society. Julian Rappold, German Council on Foreign Relations

Now the risk of a Grexit is very real, and no one knows exactly how much risk of contagion to the rest of the euro zone that would entail.

It raises the question whether the Teflon chancellor, so called because scandal and mistakes never seem to stick to her, may have lost her touch.

What was once seen as her greatest asset: a tendency to sit and wait and let events unfold, is now seen as a liability.

“She failed to really show leadership over the past few months,” said Sebastian Dullien, senior policy fellow with the European Council on Foreign Relations in Berlin. “She has let her finance minister do all the negotiations and even after Schäuble was obviously fed up with the Greeks, she still didn’t really intervene.”

Many outside Germany feel Ms. Merkel backed Greece into a corner. Last year, the former conservative prime minister, Antonis Samaras had sought some kind of concessions from the troika of lenders – the International Monetary Fund, the European Union and the European Central Bank. He argued that years of punishing austerity had eroded public support for his government. The impact on the Greek economy had been disastrous, with the economy contracting by a quarter, massive unemployment and huge deficits in healthcare and other public services.

There have been several media reports that Mr. Samaras pleaded with Ms. Merkel last November during a visit to Berlin to give him something to offer voters, knowing that elections likely loomed. She offered him nothing, and in the snap elections that followed in January, Syrizia won 36.3 percent, on an anti-austerity, and anti-German, ticket. Mayhem has followed.

This coming November Ms. Merkel will have been chancellor for 10 years. As she decides whether to go for a fourth term in 2017, she will be aware that what happens this week, and in the coming months with Greece and the euro zone, will affect her legacy.

German newsweekly Der Spiegel’s front cover this week depicted her sitting among the rubble of Athens with the headline, “If the euro fails, Merkel’s chancellorship fails.”

Many blame Germany’s leading role in pushing austerity over the past five years, and Ms. Merkel’s muted crisis management since Mr. Tsipras and his radical left party came to power, for bringing the euro zone to this chaotic situation.

Greece has been the constant terrier nipping at the heels of the chancellor, first bailed out in 2010 and again in 2012, with Germany the biggest contributor to the €240 billion in loans to Athens.

For years, Ms. Merkel played to her domestic audience, at the cost of her reputation internationally. Germany has given Greece some €80 billion in bailouts over the years and she has demanded in return not just austerity but deep structural reform. This has made her unpopular in Greece, but has appeased Germans who had questioned the wisdom of giving their money to Greeks.

Polls have repeatedly shown that Germans have consistently approved of their chancellor’s handling of the crisis.

In a poll conducted last week for Handelsblatt, 76 percent of Germans thought it was the Greek government, rather than creditors, that was to blame for the country's situation.

Yet to critics, for all her popularity at home, Ms. Merkel herself was far too passive as the Greek crisis came to a head, and she failed in her role as global leader.

Quelle: dpa
</a> Back in the days when Angela Merkel and Alexis Tsipras were still talking.
(Source: dpa)

 

In general Mr. Dullien sees the chancellor as not being proactive enough during the euro crisis. “She always did what she felt was necessary not to let the euro fail but not a single step more.”

Mr. Dullien, who is also professor of international economics at the HTW University of Applied Sciences in Berlin, argues that she also did little to counter the anti-Greek sentiment in much of the German press and public opinion. “She contributed to the feeling that the Greeks have done nothing and they are just trying to get into Germany’s pockets.”

While it would be a mistake to characterize Germany as the only country pushing austerity on Greece and other countries, such as Ireland and Portugal, it was certainly at the helm of the group of northern European countries, including Austria, Finland, the Netherlands and the Baltic States, that saw fiscal rectitude as the perquisite to recovery. It was France and the southern European countries, predominantly Italy, who had sought a more growth-lead strategy.

This pushing for reforms was not regarded in Germany as cruelty to the Greeks, but rather essential for putting the economy on a sustainable path.

“Despite all the criticism that she is lacking a clear vision, I think she has stuck to her principles,” said Julian Rappold of the German Council on Foreign Relations in Berlin. “She has always made clear since 2012 that it is of utmost importance to stabilize the euro zone.”

“She has always worked toward keeping Greece in the euro zone," he told Handelsblatt Global Edition. "However, she did so on lines with German economic orthodoxy, really emphasizing the whole aspect of conditionality while pressing on fiscal consolidation and rewarding structural reform with financial aid.”

Yet, the way the radical left government in Greece has responded, by demanding debt relief and rejecting severe cuts to pensions and other public spending, has thrown this policy into disarray, and there is a very real possibility that the country could now leave the euro zone.

Greeces Debts-01



 

 

“A Greek exit would mean that these policies have failed,” said Mr. Rappold. Nevertheless, at home, few will blame the chancellor.

“Merkel can argue that she stuck to her principles. Even though she agreed to concessions, she can shift the blame on the Greek government for ending the negotiations and calling for a referendum.”

There is indeed deep frustration in many parts of German politics with the way the Greeks have behaved over the past few months. At a private meeting of her party last week, the chancellor reportedly described Mr. Tsipras as having a “harsh and ideological” approach that was “knowingly driving the country against the wall.”

Many in her party feel there was little she could have done in the face of Syriza’s populism.

“The chancellor and above all her finance minister, Dr. Schäuble, have done outstanding work in their efforts in the Greek crisis the past few weeks and months,” Philipp Missfelder, foreign policy spokesman for Ms. Merkel’s Christian Democrats, told Handelsblatt Global Edition. “They constantly offered talks and negotiations, and made offers to the Greek government. But the government isolated itself more and more and made demands on the solidarity of Europeans.”

“A precondition for Europe’s unity and the stability of the euro is that there is a willingness to compromise from all sides,” Mr. Missfelder said. “Self responsibility and solidarity are always two sides of the same coin.”

Whatever the rights and wrongs of the past few weeks and months, Ms. Merkel faces a dilemma now. If she ends up giving Greece even more concessions, including debt relief upfront, then she will have great difficulties selling that domestically, both to a skeptical public and her own party.

Ms. Merkel knows that even if a deal can be hammered out this week, it would need to be passed by the Bundestag. While the chancellor can probably rely on the opposition Greens and far-left Left Party, as well as her coalition partners, the Social Democrats, a full-scale revolt by her own CDU and the CSU, would be damaging.

Her CDU party has been in a rebellious mood for months. In February when the Bundestag voted on the extension of Greece’s bailout program, 29 of the 32 parliamentarians who rejected the extension came from Ms. Merkel's CDU and the CSU. Many more would have reportedly done so, were it not for a direct appeal from Mr. Schäuble. However, 118 conservatives who voted "yes" gave personal statements saying they would not necessarily back any new bailouts for Greece.

And any remaining good will has been further eroded by the attitude and tactics of the Greek prime minister, Alexis Tsipras, over the past few months.

On Sunday night as the news of the resounding “No” from the Greeks emerged, Andreas Scheuer, the general secretary of the Bavarian CSU, dismissed the Syriza government as “left-wing blackmailers and deceivers of the people, who will not manage to get anywhere with their dirty tactics,” in a Tweet. He added: “Kali nichta, Hellas – Good Night, Greece!”

It was one of several negative statements from leading conservatives. “I see no basis for new negotiations … The trust is completely destroyed,” Carsten Linnemann, head of the CDU’s small and medium businesses group said.

“We’ve followed every twist and turn of the Greek government and, in a situation such as this, the time has come to say calmly: that’s enough,” said Wolfgang Bosbach, a senior CDU lawmaker and long-time critic of the bailouts.

However, Ms. Merkel will have an eye on more than just German politics, but also the risks of contagion to other euro zone countries, and Greece’s geopolitical importance to the European Union and NATO. And the resignation on Monday morning of Greek finance minister, Yanis Varoufakis, who particularly aggravated Berlin, might make any concessions, for example on debt restructuring, easier to swallow.

</a> Luckily the chancellor doesn't have to go it all alone; she'll meet the French President tonight.

 

While Ms. Merkel and the rest of the European establishment may succeed in holding together the euro zone, with or without Greece, the impact on the European political landscape of the past few year’s policies will be far-reaching.

From Finland to Spain, anti-establishment populist parties on the left and right are moving from the fringes of politics to becoming the major players, as center left and center right parties disappoint many frustrated Europeans.

 

Greek Referendum-01

 

While dissatisfaction often has domestic roots, including disgust with corruption, the austerity policy, framed by Ms. Merkel and others in Europe as having no alternative, has contributed to this fragmentation.

“The way the euro crisis was dealt with, putting forward a policy which is sold to the public as being without alternatives…and not offering space for political debate about it, has certainly disillusioned many parts of society,” said Mr. Rappold of the German Council on Foreign Relations.

“You see in Ireland with Sinn Féin, in Spain with Podemos, in France with the Front National, and in Greece with Syriza, the more discontented the people are and the less they believe in their traditional political elites, the more political systems will fragment in Europe,” Mr. Dullien said. “So it’s already a political crisis now.”

 

Siobhán Dowling is an editor with Handelsblatt Global Edition and has reported on political developments in Germany and Europe for the past decade. To contact the author: [email protected].