Just what is it about the German Chancellor, Angela Merkel that is causing so much angst of late? Look hard and one finds increasing aggression creeping in to the German stance on partnerships, the Euro and indeed, right at the heart of Europe within the EU itself. Take the vexing situation over the ailing Greek economy for example and for which in a unified currency area that includes both Germany and Greece supposedly as partners working together one might have expected to find the most powerful Euro economy member working hard to find an internal EU or better still, an ECB/Euro based solution? Not a bit of it though. In fact, whilst at this stage Greek Prime Minister George Papandreou has yet to even officially request help from his Euro and EU partners or for that matter anyone else it seems that each time the situation appears to be close to a meaningful solution should the Greek government find itself forced to ask and the Council of the European Union appears to have almost managed to put some kind of package of support together the German Chancellor throws her toys out of the pram!
It isn’t just the situation in Greece of course that has been getting under the skin of the German Chancellor. Just a couple of days ago she apparently pretty badly to comments emanating from France that it was high time Germany, the EU’s largest exporter and one that despite the strength of the Euro still appears to be doing fairly well, should do rather more to increase domestic demand – so that France might benefit from increasing its exports to Germany! Not surprisingly that idea apparently went down like a hold in the head in Berlin – so I am reliably told! Being serious though might be to suggest that either Frau Merkel is getting a little fed up of being pushed around by the EU or that she fears that if Germany is seen to be leading from the front as far as the Greek situation is concerned meaning fronting up on the aid that is or maybe will soon be required by Greece she knows that she will risk the wrath of voters.
Germany’s current behaviour over helping to find a solution to the Greek economic crisis is an object lesson to others like Britain that decided for other reasons to stay outside of the Euro. Heaven only knows how Germany might react if it was the United Kingdom that was in a similar mess to Greece on worries whether it might default or of Portugal, Spain and Italy come to that and that all have huge budget deficits and burgeoning national debt. On the other hand and including the political view perhaps new found German hardness of attitude to solving the problems of others is not that surprising. For instance, given that business sentiment in Germany has been improving of late (the most recent German business sentiment indicator Ifo showed that confidence had risen to a 21 month high of 98.1 on the back of manufacturing recovery and some signs that retail was also bouncing back) for political reasons it is perfectly sensible that the German Chancellor should be concerned that as recovery across the overall western area looks at fragile at best Germany would do better to keep its powder absolutely dry rather as opposed to damaging its own economic recovery by being regarded as prepared to make potentially high risk loans in order to support fellow EU member state with which it has not necessarily enjoyed the best of relations.
Angela Merkel isn’t the only leader of an EU nation that wants settlement of the Greek economic mess to be resolved by a combination of International Monetary Fund and bilateral EU aid. Indeed, right from the beginnings of the Greek crisis we ourselves have called for the IMF to be far more involved finding a solution than had appeared to be wish of the EU. In a sense and unlike some of her Euro partners Angela Merkel is accepting that the Euro area is not of sufficient age and strength to sort this problem out for itself. One day perhaps the EU and maybe the European Central Bank as the controlling factor behind the Euro currency may be in a position to solve all or most of the internal problems placed on its doorstep. Not yet though! Nevertheless, the situation has now moved on somewhat and it seems that the message from Angela Merkel now is that should a combination of support for Greece come from the IMF and EU this must only be regarded as a last resort. In other words Angela Merkel might even prefer that Greece should be left to stew in its own juice to the point of even walking away from the Euro. Meanwhile the situation in Greece is at least being discussed at the Brussels EU leader’s summit over the next two days. Few will be that surprised if a co-ordinated package of bilateral loans doesn’t finally appear even if leaders may need to take it home to agree first. I may well be wrong but even allowing for German politics and the need for Angela Merkel to be careful how she plays this particular hand I sense that as German language on the Greek economic situation has been hardening by the day we may see this new found wrath being heard on other problems that the EU and ECB face as well. Partly this new found annoyance may be due to disappointment on the part of the German leader that the Euro authorities have failed to provide a final solution on Greece that didn’t place so much of a burden on Germany. Partly it may be due to disappointment over the internal plans of Greece to reduce its deficit. Indeed, Merkel may well fear the possibility of an implosion on the combined implications that a potential Greek default might have on the German economy. Certainly though she is worried about votes.
I may also wonder whether the worsening German attitude and approach to the current Greek situation that has been created by concern that before long some other Euro members might be putting up there hands to request help? Indeed, I may well ask whether the German viewpoint been made all the worse over the past twenty-four hours by the downgrade in the rating of Portugal? Has, I wonder, the hardened approach by Angela Merkel anything to do with concern over dangers about the debt status of some other Euro member states and that could impact on the Euro itself putting it back by several years perhaps or maybe even placing the future of the eleven year old currency at longer term risk?
