Tag: Angela Merkel

Here at the Brussels blog, we’re keeping a close eye on the run-up to next Friday’s rare one-day summit of European Union heads of government. And nothing is occupying more of our attention than whether leaders will actually tackle the ongoing eurozone crisis at the conclave.

One of the events that had been closely monitored by the tea-leaf readers was Tuesday night’s private dinner outside Berlin between the two main antagonists in the debate, José Manuel Barroso, president of the European Commission, and Angela Merkel, the German chancellor.

According to people we have talked to, however, there was little meeting of the minds. Even though the dinner lasted for well over three hours – and almost all of it was occupied by discussions of economic policy – there is still no agreement on whether to put reforms touted by Barroso, including a revamp of the EU’s €440bn bail-out fund, on next week’s agenda.

Angela Merkel, the German chancellor, was one of the last to arrive at the pre-summit gathering of centre-right leaders outside Brussels, but on the way in, she had some calming words to offer.

Some diplomats had feared Merkel would insist on new language to be included in the otherwise benign treaty amendment scheduled to be debated tonight, making the approval process more complicated.

But she told reporters she is backing “very limited treaty change”, a signal there will likely be little opposition from Berlin.

The EU’s final two-day heads of government summit of 2010 starts Thursday and early betting is that it will be much quieter than the last time the 27 leaders assembled in Brussels, a gathering that set off a bond market panic which the continent is still recovering from.

The main event will be Thursday night, when the leaders are expected to sign off on a brief change in the EU’s treaty to allow for the creation of a new financial rescue system to replace the current, temporary €750bn bail-out fund.

There is still some nervousness that Angela Merkel, the German chancellor, may push for additional language in the text to make explicit that the new bail-out system can only be accessed as a “last resort,” or ultima ratio in Latin, the phrase being used by the cognoscenti.

But Merkel did not mention the ultima ratio demand in her list of principles before the Bundestag Wednesday, and there seems to be little appetite among other members to let her bulldoze the new language in – particularly since it could cause more confusion among bond traders, who might wonder what all the other resorts are before the last one.

The opening feature of any EU summit is the gathering of heads of government at their partisan caucuses. These days none is more important than the European People’s Party, the right-wing EU coalition that includes Angela Merkel, Nicolas Sarkozy and Silvio Berlusconi.

If early indications at their meeting at the National Botanic Garden on the outskirts of Brussels are any sign of what’s to come, Ms Merkel may have trouble convincing even her allies of the need for re-opening EU treaties to create a new, permanent bailout system for future Greek-like collapses.

The call by Angela Merkel to reopen the European Union’s treaties in a major address to the Bundestag is already generating reaction from heads of government in other member states as they begin descending on Brussels for a two-day summit.

Ms Merkel worked the phones the day before the summit, calling several of her counterparts in an attempt to shore up support – a sign of just how precarious her position is and her need to come out of the summit with a victory following intense criticism at home for her political deal-making to win over reluctant allies.

Greece has got a pat on the back in its first post-bailout report from the European Commission, the ECB and the IMF. “The programme is off to a very strong start,” they said in Athens. So that should be a green light for the next €9bn tranche of the total €110bn rescue package to be paid out next month.

But there is a fly in the ointment. Plucky little Slovakia, a eurozone member state that knows all about tough austerity measures, is refusing to sign up for its contribution to the rescue plan.

In spite of fierce pressure from Brussels, the new government in Bratislava is adamant that it would be wrong to pay its hard-earned taxpayers’ money to another eurozone member that has “consistently carried out irresponsible fiscal policy.” It is prepared to back the European Financial Stability Facility – the €750bn standby rescue package set up to stop contagion from the Greek crisis – but not the original Greek bailout.

Reforming the management of economic policy, primarily in the eurozone but also in the European Union as a whole, is without question one of Europe’s highest priorities.  Few steps would do more to raise the EU’s credibility with the US, China and the rest of the world than concerted action to improve European economic performance and make the euro area function more efficiently as a unit.  Much of this comes under the heading of “economic governance”. But the difficulty is that it is not always easy to figure out which Europeans are in charge of the process.

On Monday Herman Van Rompuy, the EU’s full-time president, chaired the latest meeting of a task force on economic governance that he was chosen last March to lead.  The task force, consisting largely of EU finance ministers, came up with various sensible ideas on tightening sanctions (financial and non-financial) on countries that break European fiscal rules.  Task force members also want to strengthen the monitoring of macroeconomic imbalances, such as the gap between large current account surpluses in Germany and deficits in southern Europe.

As the EU prepares for its summit at the end of the week, the FT’s senior foreign affairs columnist Gideon Rachman chairs a debate with Mats Persson of Open Europe and Charles Grant of the Centre for European Economic Reform. They discuss the tensions between France and Germany over the southern European members’ debt crisis, and the call for greater budget scrutiny, which the UK is questioning.

The European Union is often derided for policy confusion and speaking with a multitude of voices – but sometimes it’s not the EU’s fault, it’s the fault of one of the member-states.  Take the idea of setting up a European Monetary Fund.  This emerged as a serious possibility for the first time when Wolfgang Schäuble, Germany’s finance minister, offered support for it in an interview last weekend with Welt am Sonntag.

Within a couple of days, however, Germany’s two most important central bankers – Axel Weber, the Bundesbank president, and Jürgen Stark, an executive board member of the European Central Bank – had distanced themselves from the idea.  Even more confusingly, Chancellor Angela Merkel chipped in with the remark that it wouldn’t be possible to set up a European Monetary Fund without changes to the EU’s governing treaty.  As she well knows, after the agonising experiences first with the EU’s failed constitutional treaty and then with the Lisbon treaty (which finally came into force in December), there is next to no appetite for such changes among the EU’s 27 governments.

The memories came flooding back when I heard last weekend that Oskar Lafontaine, the leftwing German political leader, was withdrawing from national politics.  Lafontaine is the sort of public figure that lazy journalists often call “firebrand” (Ukraine’s Yulia Tymoshenko, though from the opposite end of the political spectrum, is another).

I first came across Lafontaine in November 1990, just after capitalist West Germany had taken over communist East Germany – a more accurate way of putting it, in Lafontaine’s opinion, than the weaselly term “reunification”.  He was the Social Democratic party’s candidate for chancellor in the first parliamentary elections in the newly united Germany, and he was holding a campaign rally in a sports hall in east Berlin.

Suddenly, there was a loud bang in the hall.  Lafontaine looked startled – with good reason.  A deranged woman had stabbed him in the throat on stage six months previously.  This time, however, it was just a child bursting a SPD campaign balloon.  “Amazing, all these Western toys you come across in the East these days,” Lafontaine murmured.

He went on to speak of the immense financial cost of reunification.  It wouldn’t be easy, he warned his east German audience, many of whom had known no political leaders in their lives except the awful Erich Honecker, the appalling Walter Ulbricht and the unspeakable Adolf Hitler.  People would have to work hard and not despair, Lafontaine continued.

As I looked around, I saw the east Germans stare at Lafontaine glumly.  This wasn’t the message they wanted to hear.  They preferred the promise of “blooming landscapes” made by Helmut Kohl, the Christian Democrat chancellor and mastermind of reunification, against whom Lafontaine was running.

Instead, here was Lafontaine, a self-confident stranger in a flashy suit, breezing in from the West, lecturing them on how to lead their lives and offering them no hope.  Although he correctly diagnosed the financial reality of reunification, he really was out of touch with the common people.  I saw this even more clearly when he was campaigning in his native Saarland and other parts of west Germany.  There he dined on oysters and Champagne, sitting next to his punk-haired girlfriend in a restaurant adorned with a modernist nude painting.  Guess who once tagged along for the ride on his campaign train?  Donovan, the flower-power minstrel of the Sixties.

Later in his career, Lafontaine was appointed finance minister in a SPD-led government in 1998, tried unsuccessfully to wrench German fiscal and economic policy in a radical left direction, and then resigned in a huff after a mere five months in office.  In 2005 he abandoned the SPD, and it wasn’t long before he hooked up with east Germany’s ex-communists in the newly formed Left party.

Some commentators are saying that Lafontaine’s departure is good news for the German left, because it increases the chances that the SPD and the Left party will be able to co-operate at national level and present a credible challenge to Angela Merkel, Germany’s chancellor, and her centre-right government.

Well, that might not be a bad thing.  In a democracy you need political competition.  But I notice that one such commentary, on the excellent Deutsche Welle website, persists in calling Lafontaine a “firebrand socialist”.  Will we never learn?  In most respects, he was a political failure.

Brussels blog

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Peter Spiegel is the FT's Brussels bureau chief. He returned to the FT in August 2010 after spending five years covering foreign policy and national security issues from Washington for the Wall Street Journal and the Los Angeles Times, focusing on the wars in Iraq and Afghanistan. He first joined the FT in 1999 covering business regulation and corporate crime in its Washington bureau, before spending four years covering military affairs and the defence industry in London and Washington.

Joshua Chaffin is one of the FT's EU correspondents, covering areas including policies on trade, the environment and energy. He has worked in the FT's Brussels bureau since late 2008 and before that was an FT correspondent in New York and Washington DC.

Alex Barker is EU correspondent, covering the single market, financial regulation and competition. He was formerly an FT political correspondent in the UK and joined the FT in 2005.

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