Merkel Plays to Germans as She Jousts With Europe

Ms. Merkel, 58 and in power since 2005, will seek a third four-year term in national elections on Sept. 22. Until then, she wants to avoid rocking the boat with voters, who give her popularity ratings in the 60 percent to 70 percent range and seem quite content with the give-and-take, muddling-through approach she has adopted in the protracted euro crisis, often to the consternation of financial markets.

Whether she is shadowboxing with the financial markets or engaged in direct spats with the leaders of Russia and Turkey, as she was this month, Ms. Merkel likes Germany to get the last word.

That was well illustrated early Thursday, after hours of haggling in Brussels over the latest compromise on banking. The bargain struck by European finance ministers required shareholders and creditors to take losses when banks collapse, with states and taxpayers stepping up only later. But because Germany still opposes any plan making its taxpayers liable for the losses of foreign banks, it stopped well short of the kind of debt sharing that markets have urged on Ms. Merkel and her country since the crisis erupted three years ago.

Martin Lück, an economist at UBS in Frankfurt, said that in Berlin’s political circles, people are more responsive to the German Parliament. “We know what the financial markets expect of us — but we are not elected by them,” is the view, he said, adding that officials cite the high popularity ratings for Ms. Merkel and her finance minister, Wolfgang Schäuble.

As if to underscore her dominance, Ms. Merkel displayed fighting form in Parliament on Thursday, before the Brussels summit meeting. As forceful as she gets, at least in public, she insisted to warm applause from her conservative deputies that Germany had shown over the past four years that “we can do both — growth and fiscal consolidation.” She rebuffed attacks from Peer Steinbrück, her Social Democratic challenger in September who is currently floundering in the polls and has accused her of causing mass unemployment.

Ms. Merkel, once famed for an austerity course she now insists was never her sole aim, has softened of late, particularly when it comes to those millions of jobless young people. Conscious that around 7.5 percent of those under 25 are unemployed in Germany — compared with 62.5 percent for Greece, 56.4 percent for Spain, and around 40 percent for Portugal and Italy — she went out of her way on Thursday to express sympathy.

“They are owed,” she told Parliament ahead of hosting a meeting on jobless youth in Europe next week, especially because they bear “no blame for the mistakes of past years.”

That put the issue squarely where Ms. Merkel seems to want it — in the backyards of other European governments. Still, even there she dodged and weaved, noting for instance that she and President François Hollande of France would be presenting joint proposals on Thursday and Friday in Brussels, never mind recent evidence of coolness in the French-German partnership.

It all suggests, said Josef Janning of the German Council on Foreign Relations, that before Sept. 22, “nothing should happen which could endanger the election success of Ms. Merkel.” Her strategy, he added, is simply “to unsettle the Germans as little as possible.”

Holger Schmieding, chief economist at Berenberg Bank, noted that this policy, if successful, would change little after the German vote. In part that is because Germany and Europe know what to expect of each other, and in part because Ms. Merkel’s course finds such broad consensus at home.

Even if Mr. Steinbrück unexpectedly won, Mr. Schmieding said, he served as finance minister in Ms. Merkel’s first coalition government and would be unlikely to change tack.

Article source: http://www.nytimes.com/2013/06/28/world/europe/merkel-plays-to-germans-as-she-jousts-with-europe.html?partner=rss&emc=rss