A few weeks ago, Newsweek called her “Slow-Motion Merkel”. The magazine sniffed that she didn’t “want the job” of leading Europe. Well, Angela Merkel just took it, pretty much dictating to the rest of the EU how to deal with the let’s-spend-like-there-is-no-tomorrow Greeks, whose fiscal chickens have finally come home to roost.
In Greece she is Public Enemy No 1, and in the French media she has gone from Lady Lethargic to “Madame Non”. When she visits London this week, the German Chancellor will enjoy new stature and renewed clout.
Mrs Merkel led by slamming on the brakes and keeping her foot down. She refused to bail out a nation that had cooked the books to get into the euro, and has resisted fiscal discipline ever since. And she won — against Nicolas Sarkozy, the European Commission, many of her EU colleagues and a good part of the German commentariat that urged her to be a good European and to pay up.
For the time being, the Greeks will not get a single cent. They will get help only when in “very serious difficulties”, and then only by way of tide-over loans. In the process, the German Chancellor also nixed the French President’s pet project: a European monetary fund. Instead, she dragged in the International Monetary Fund (IMF), which is to cover one third of the support, if it comes to the worst.
That did not go down well with the Euro-nationalists who, especially in France, view the IMF as a tool of American dollar imperialism (though its managing director is always a European). Mrs Merkel calculated correctly that a purely European- based fund would be a lot softer on Hellas than a global outfit such as the IMF, which is known for the harsh discipline it metes out to the wayward.
So the German Chancellor got her way, and that’s what we call “leadership”, though it was executed more by digging in than by lashing out. Naturally, this coup — pursued patiently and stubbornly — has triggered much head-scratching around Europe, and dark suspicions, to boot. What are the Germans up to? Haven’t they always footed the bill? Are they turning against Europe? Indeed, isn’t the euro their baby?
It is. Go back 20 years, to when the Berlin Wall fell and German reunification was suddenly upon us. Nobody really liked the idea, least of all Margaret Thatcher and Jacques Chirac. With Germany losing its Cold War chains, it might return to the bad old ways as power-house in the centre of Europe, assertive and arrogant.
Chancellor Kohl well understood those fears, and the euro was the way to soothe the angst-ridden. Giving up the almighty deutschemark in favour of a European currency was the price of reunification. It would Europeanise, so to speak, the greatest source of German power and thus reassure the country’s restive neighbours. But there are no free gifts in the affairs of nation. In return for fettering itself, Germany insisted on binding all the others. The European Central Bank is, in truth, the Bundesbank writ large: the stern guardian of monetary discipline. Hence, the stringent rules of admission: low interest rates, low inflation, low debt. At Germany’s behest, the Stability Pact was added. Fiscal policy had to be just as tight, especially with regard to deficit spending.
The Greeks, having prettied the ledgers to get in, have been sinning against the commandments of fiscal rectitude ever since, and that’s why they are in deadly trouble. They have run up an international debt said to total $350 billion, and they can’t service it. Or so it seems, and hence default looms. Following Greece down that road are Spain, Portugal and Italy.
That’s where we are, and so Merkel the Mean is anything but. She has not turned against Europe, but against those whose extravagance threatens the euro. She is not breaking with the Kohl tradition, but reasserting the original deal. To save the euro, which has lost 10 per cent against the dollar on account of the Athenians, she rightly insists that the profligate must get their house in order instead of angling for multibillion-dollar handouts.
That is not anti-, but pro-European if you view the euro as one of Europe’s greatest feats on the way to a more perfect union. To draw the line against the worst offender, while Spain, Portugal et al nervously take note, should have an entirely salutary effect. The French have a phrase for it, taken from Voltaire: harsh punishment serves “to encourage the others” to remain virtuous.
We shall see, for little that Europe ever decides is cast in concrete — especially if Greece does default. But there is still the larger issue that vexes minds: have the Germans, almost in a fit of absent-mindedness, stumbled into a new role on the European stage? If they have grabbed leadership, the foot-stomping is defensive rather than aggressive, as in the ways of Wilhelm or, God forbid, Adolf.
Assertive Angie sought not to project Germany’s power, but to protect Europe’s, as embodied in monetary union. The euro is under assault not only by Greece et al but by an enduring financial crisis that has exposed Europe’s many weaknesses in the rivalry with America and Asia (which are both emerging more quickly from recession). To chastise the Greeks will not crack the hard nuts, such as Europe’s low tolerance for change. But a crumbling euro will hardly make for a rosier outlook.
“Frau Europa, it is time to lead,” Newsweek poked the Chancellor. Well, she did, finally. That’s good for Europe — and could even be good for the Greeks if they are forced to do their homework.
Josef Joffe, editor of Die Zeit in Hamburg and a senior Fellow at Stanford University.