Tag Archives: euro crisis

Sarkozy and Merkel bond cools ahead of French vote

GlobalPost, April 21, 2012

BERLIN— It was nice while it lasted. But “Merkozy,” it seems, is no more.

Europe’s odd couple has hit a rough patch. And it would be difficult to revive the relationship, even in the unlikely event that one half of the pair survives his tough political battle in the days ahead.

As French President Nicolas Sarkozy faces Socialist challenger Francois Hollande in the first of round of the presidential election on April 22, his campaign has turned increasingly populist in tone. This had already caused some unease in Berlin, but the fact that the French president broke an important promise he made to German Chancellor Angela Merkel not to bring up the role of the European Central Bank in the euro crisis has caused even more of a rift.

It looks like the end of an unlikely alliance forged over the course of the past few years.

It was hardly surprising that the outspoken, hyperactive French president with the bling lifestyle and the supermodel wife, did not, at first, hit it off with the modest, cautious German chancellor who still does her own grocery shopping. But as the Franco-German relationship became increasingly important to both of them, the initially frostriness began to thaw.

After all, Merkel needed an ally to avoid the perception that Germany was calling all the shots in the euro zone. Sarkozy wanted to retain France’s traditionally strong political role in the EU despite the reality of Germany’s growing dominance and France’s waning influence. Continue reading

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Berlin budges on boosting euro crisis firewall

GlobalPost, 29 March, 2012

BERLIN, Germany — The European debt crisis hasn’t gone away.

Despite something of a lull following the frenzied maneuvers to prevent a Greek default, the specter of contagion still looms.

As the 17 euro zone finance ministers prepare to meet in Copenhagen later this week, the focus has now shifted to exactly how much firepower is required to prevent the crisis from spreading to big economies like Italy and Spain.

Germany, the bloc’s paymaster, has long been reluctant to see the euro zone’s new permanent bailout fund increased beyond the agreed 500 billion euros.

This week, however, Chancellor Angela Merkel signaled that Berlin is open to boosting the firewall by allowing the temporary and permanent funds to run in parallel for a transitional period. Continue reading

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In the EU, economic growth seems elusive

GlobalPost, March 7, 2012

BERLIN, Germany — Europe is on the hunt for growth, but has little idea where to find it.

Many EU countries are being forced to follow a strict austerity path to slash their debts, but these measures seem to be sapping their ability to grow their economies and create jobs.

Some analysts warn that in the absence of measures to boost growth, more bailouts and debt write-downs could be in the cards.

The latest figures are certainly worrying.

The euro-zone economy contracted by 0.3 percent in the fourth quarter of 2011, the EU’s statistics office Eurostat confirmed on Tuesday, and unemployment reached an average of 10.7 percent in January, the highest since the euro was introduced in 1999.

That figure masks the huge discrepancies within the bloc. For example, while Spain’s unemployment is now at 22.9 percent, Austria’s is only 4 percent.

Most attention recently has focused on the drama in Greece, which has required a second bailout in two years to keep from defaulting on its debts.

The embattled country has been prescribed severe austerity in recent years to tackle its alarming public debt mountain, yet the medicine seems to be killing the patient. The Greek economy shrank by 6.8 percent in 2011. The bulk of the new 130 billion euro ($172 billion) bailout will go to lenders rather than being used for any measures to boost growth.

The Greeks are not alone. Ireland and Portugal, the other two recipients of bailouts from the troika of the European Central Bank, the European Union and the International Monetary Fund, have also had to sign up to reforms and punishing public-spending cuts as a condition for the funding. Continue reading

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Why Germans still love Angela Merkel

GlobalPost, March 1, 2012

BERLIN — Angela Merkel is facing yet another difficult juggling act.

When European leaders gather in Brussels Thursday for another summit, the German chancellor will be under immense pressure to boost the euro zone firewall — that is, spend more money — to prevent contagion from a still fragile Greece from spreading to other struggling states.

At the same time, the “Iron Chancellor,” as she is known in Europe, is facing a rebellion in her government coalition and a public that is balking at the costs of bailing out Greece and the other EU states.

This week, Merkel had to rebuke a cabinet member, Interior Minister Hans-Peter Friedrich, after he broached the idea of encouraging Greece to exit the euro zone. She then was forced to rely on the opposition to push through the bailout for Athens in the wake of a backbench revolt.

Most Germans — 62 percent — are opposed to the latest rescue package for Greece, according to recent polls.

Still, Merkel remains a popular leader, not despite but because of the euro crisis. Germans have been impressed by her tough stance on the crisis, which has yet to have a direct impact on them. Continue reading

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The debt brake: Germany’s most dangerous export?

GlobalPost, Feb. 13, 2012

BERLIN, Germany — In recent months, German Chancellor Angela Merkel has been using the urgency posed by the euro zone’s debt crisis to reshape Europe’s economies, largely to conform with a particular quirk of German economists: disdain for government debt.

For now, Merkel appears to be getting her way. Late last month, 25 of 27 EU states obediently signed up to play by her rules when they agreed to pan-European fiscal union. If the pact is ratified by national governments, the entire EU — apart from the British and the Czechs, who opted out — will have to strive to reduce their deficits to close to zero, or face the consequences.

The plan is as controversial as it is bold. For some countries, meeting the debt goals will be a gargantuan task. And there are fears the austerity drive will choke off any hope of growth in many places. Yet it is the price to pay, it seems, to maintain Germany as Europe’s paymaster, providing the bulk of the funds for the euro zone’s bailout packages.

And at the heart of the German-designed fiscal pact is a concept known as a debt brake. Instead of the 3 percent ratio of deficit to GDP that the Maastricht Treaty rules had laid down, most of Europe has agreed to a structural debt strait-jacket of just 0.5 percent of GDP.
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Can Mario Monti stave off disaster in Italy?

GlobalPost, Feb. 9, 2012

BERLIN, Germany — All eyes have been on Greece as it battled to stave off default.

But it is Italy that may well be decisive in determining the outcome of the euro crisis.

Most analysts agree that Italy’s survival is vital if the euro zone is to avoid catastrophe. “The euro zone can do, if needs be, without Greece,” said Timo Klein, senior economist at IHS Global Insight. “But it certainly cannot do without Italy.”

The man leading the rescue mission? Mario Monti, who just three months ago was an economics professor in Milan.

Now the new prime minister, Monti is firmly in the driver’s seat in Rome, tasked with steering Italy away from the precipice of insolvency, and thus protecting the euro zone from a fatal blow. And many analysts predict that if anyone can pull it off, he can. Continue reading

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Is a German ‘Fourth Reich’ emerging?

Europeans accuse Berlin of using the euro crisis to boost German power.

GlobalPost, Nov. 15, 2011

BERLIN, Germany — It may have been a bad idea to send a German. And his name certainly didn’t help matters.

When Horst Reichenbach arrived in Athens recently to head a new European Union task force to help the country deal with its debt, the Greek media instantly dubbed him “Third Reichenbach.”

Cartoons appeared of him in Nazi uniform. A Greek tabloid showed a photo of his office with the headline: “The new Gestapo headquarters.”

The Greeks are not alone in harboring suspicions toward Germany, which occupied the country during World War II. The British conservative press is up in arms. The Daily Mail went so far as to accuse the Germans of attempting to use the euro crisis to “conquer Europe” and establish a “Fourth Reich.” Meanwhile in Poland, Germany’s supposed imperial ambitions became an issue in the recent elections.

And as the euro crisis has deepened, German Chancellor Angela Merkel has pushed for the EU to have a greater say in the domestic governance of the euro zone’s seventeen members. Among other measures, she has called for real European power over countries’ budgets. Continue reading

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Merkel Walking an Electoral Tightrope

The Sunday Business Post, April 10, 2011

The reaction in the political corridors of Berlin to the fact that Portugal has finally faced the music and asked for a bailout has been one of relief.

This is tinged with determination that this will be the last country to require a lifeline from its eurozone partners.

The German government, battered by a string of losses in key regional votes since the beginning of the year, is loath to be seen by the electorate as wasting yet more of taxpayers’ money on their profligate neighbours.

With just two years to go to federal elections, the ruling coalition of Chancellor Angela Merkel’s conservative Christian Democrats (CDU) and the pro-business Free Democrats (FDP) is fully aware that any further bailouts – of, say, Spain, Italy or Belgium- could spell electoral doom. Continue reading

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The World from Berlin: ‘The Irish Should Stop Bashing Those Who Want to Help Them’

The Irish government insists it does not require a bailout, even as a team of EU and IMF experts heads to Dublin for talks. Yet aid could also come from another quarter, in the form of Ireland’s neighbor Britain. Meanwhile, the German press is divided on whether Berlin shares some of the blame for Ireland’s woes.

On Tuesday, embattled Irish Finance Minister Brian Lenihan fended off pressure from other euro-zone member states to seek a bailout package from the stability fund established by the European Union and the International Monetary Fund earlier this year. Yet Dublin may not be able to hold out for much longer.

The imminent arrival of IMF and EU experts in Dublin for what are being described as “short and focused discussions” starting on Thursday could see Ireland eventually tap into the fund, though on Tuesday night, following a meeting of euro-zone foreign ministers in Brussels, Lenihan was still insisting that such a bailout was “not inevitable.”

Speaking to public broadcaster RTE on Wednesday morning, Lenihan said Ireland would accept EU support if the banking crisis was too big for the country to fix on its own. “Ireland is a small country and if the banking problems in the country are too big for this small country to manage, Europe is making it clear that they will help and help in every possible way to secure the system,” Lenihan said. Continue reading

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