Crisis in Germany – revisited

A little more than two years ago in this blog, I wrote of a crisis coming to the German government. Looking back, one can indeed say that the government has been in a permanent state of crisis since then. Admittedly, the crisis is of a different kind than in other European countries these days: The government did not crumble, although Angela Merkel seems to be the only remaining ‘strong man’ in it. Yet, with reference to the current European football championship, the situation looks a lot like the matches that Germany used to play: stumbling along rather than shining, blocking in the defence rather than driving the ball forward, and – maybe – finally winning with sheer luck.  Whether Germany – and Europe – will also have such luck in the ongoing crisis is much less sure.

So what has happened in Germany in the past two years during which governments have changed from Athens to Bratislava, from London to Madrid, and from Paris to The Hague? Interestingly, some of the crisis signs from 2010 have been repeated in just the same way: Another Federal President, Christian Wulff, stepped down, this time for accusations of having accepted personal favors during his tenure as Minister President of Lower Saxony. Despite being handpicked by Angela Merkel as the successor to the hapless Horst Köhler, his demise did not tarnish the chancellor’s support in the public. Similarly, Mrs. Merkels governing Christian-Democratic Union  (CDU) again lost the state election in North-Rhine Westphalia, which was called for after the left-of-centre minority government formed in 2010 could not pass the state budget. As a direct blow to Mrs. Merkel, it was her (now former) protegé and federal minister of the environment, Norbert Röttgen, who led the CDU into the CDU’s worst ever performance in Germany’s most populous state. Still, also this defeat has so far not damaged the chancellor. To the contrary, Germans put their trust in her – and her fellow CDU finance minister, Wolfgang Schäuble – to lead the country through the crisis.

Which is the third constant in this picture (in addition to resigning Presidents and lost elections, that is): the European debt crisis. Since June 2010, things have turned from worse to worst in a number of countries. Greece, Ireland, and Portugal all had to seek refuge under the European Union’s ad-hoc rescue umbrella (called European Financial Stability Facility, or EFSF). Most recently, Spain had to ask for EU help, valued at 100 billion euros, to save its run-down banks. Greece is now closer to an exit from the common currency than ever before, given that the parliamentary elections there this Sunday have turned into a quasi-referendum on the euro. The consequences of what has come to be known as “grexit” are as unpredictable as they are for a continuation of the current muddling through based on never-ending capital injections into troubled economies.

In the end, it is this external crisis that remains the most virulent danger for the German government and the country as a whole. Indeed, the continous threat from outside is likely to have helped Angela Merkel weather internal crises that could otherwise have meant the end of her chancellorship. Still, the key to resolving this outside crisis primarily lies in Berlin itself, most commentators agree. That refers not only to Germany financial prowess, but also – and mostly – to her willingness to allow deeper economic and political integration (e.g. through the issuance of joint eurobonds or the establishment of a banking union) in return for such financial aid. If we have come to the point where it is no longer choice but necessity dictating the next integration steps, the question is whether Angela Merkel and her fellow European leaders will muster the courage to take the necessary decisions. Although she does not show any signs of being tired of her office, Mrs. Merkel may just consider her own words – “If the euro fails, Europe fails” – along the bonmot of her Luxembourg colleague, Jean-Claude Juncker, from long before this crisis started – “We all know what to do. We just don’t know how to get re-elected after we’ve done it” – and enter the history books as the chancellor who did not care about re-election in 2013 but saved Germany and Europe regardless.