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POLITICAL ECONOMY
Walker's World: Merkel almost alone
by Martin Walker
Paris (UPI) Apr 29, 2013


disclaimer: image is for illustration purposes only

A consensus is gathering pace in Europe against the controversial and painful austerity policies that are being driven by German Chancellor Angela Merkel.

Even one of her own "wise men" economic advisers has joined European Commission President Jose-Maria Barroso and the leaders of Spain, France and Italy who are calling for some growth-friendly policies since the austerity is showing few positive results.

"There isn't a single indicator I can find that suggests this policy of aggressive deficit reduction is working," Peter Bofinger, a member of Germany's council of economic advisers, said last week.

His critique was echoed by Germany's Green Party leader Juergen Trittin, who claimed that the high levels of unemployment in southern Europe risked wrenching Europe apart. The Greens are now actively exploring the prospect of an electoral alliance against Merkel's ruling Christian Democrats, just as the new anti-euro party, Alternative fur Deutschland, threatens to eat into her vote.

Facing a tough re-election challenge in five months, Merkel is publicly digging in her heels against any overt relaxation. But in the corridors of Brussels and in the back rooms where Europe's deals are done, she is bending as discreetly as she can.

She has already granted Portugal more time to balance its budget, held her tongue against what she sees as the disastrous return to political life of Italy's Silvio Berlusconi and seems prepared to grant Spain and France more time to meet Europe's new budget deficit targets.

But the attacks on her keep coming. Last week, a policy document from French President Francois Hollande's Socialist Party was leaked which blamed a "selfish" Merkel for Europe's crisis.

"The [European] project is today battered by a marriage of convenience between the Thatcherite leanings of the current British prime minister -- who only conceives of a Europe à la carte and of rebates -- and the selfish intransigence of Chancellor Merkel, who thinks of nothing but the deposits of German savers, the trade balance recorded by Berlin and her electoral future," the document read.

It condemned the EU Commission as "a prisoner of the great feudal conservatives." The paper went on to demand a renegotiation of austerity plans "imposed on Greece and Spain" and a re-assessment of the eurozone's stability pact, which requires strict budgetary controls. It concluded that "France has the only sincerely European government among the big states of the EU."

Appearing not at all embarrassed by the leak, French officials said blithely that any personal remarks would be edited out before the document was officially published and then another French minister returned to the attack. Benoit Hamon, the social and consumer affairs minister, said it was "time to finish with the politics of austerity in Europe."

He added: "Only Merkel, supported by a few northern countries, believes austerity is working ... when it's clear there is no prospect of unemployment rates going down."

Merkel's irritation at becoming the isolated scapegoat for the tough cuts in public spending across Europe is increasingly apparent on her public appearances.

"I call it balancing the budget," the German chancellor said last week. "Everyone else is using this term austerity. That makes it sound like something truly evil."

German Foreign Minister Guido Westerwelle, came to Merkel's defense in a speech in Brussels, saying, "We are convinced that if we give up on budget consolidation in Europe and return to the old approach of more and more debt, then we would cement mass-unemployment over a period of many years."

Increasingly on the defensive at home in Germany as well as in Europe, Merkel at the weekend faced down some of her own supporters who claimed that in the case of Greece and Cyprus she had broken her own pledge to the German people of "no more bailouts."

Europe's leaders were in uncharted territory after the debt crisis exploded in Greece, she said. "None of us expected to find ourselves in such a situation. I might add that the markets also didn't predict it," Merkel said.

Still, Merkel wasn't entirely alone. Lithuanian President Dalia Grybauskaite, who needs Merkel's support for her own bid to join the euro, came to Merkel's defense in an interview with Der Spiegel last week.

"I think the mood is not anti-German. It is anti-EU," Grybauskaite said. "Germany is now representing the EU, because it pays for the bailouts and sets the conditions. Before, institutions in Brussels were the target. Now it is Merkel. It is easier for local politicians who are themselves responsible for a national crisis to blame somebody from the outside. But one has to remember: If it wasn't for Germany, these countries would be bankrupt."

That is true. Merkel's fear is that if she makes too many concessions in bailing out the bankrupt European partners, not only could she lose her election in the fall, but that Germany might follow the rest into bankruptcy. The latest quarterly figures showed the German economy shrinking, along with the rest.

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