Rift Over Crisis Response Barroso's Struggle to Escape Merkel's Shadow
German Chancellor Angela Merkel is angry at European Commission President Jose Manuel Barroso for trying to take over the management of the euro crisis by proposing an increase in the EU's rescue fund. The proposal by Barroso, who owes his job to Merkel's backing, reflects his desire to break free from her.
He's finally done it. Right now, he's "one of the world's most powerful politicians." And, here, he's treated accordingly. The country's most prestigious university has bestowed an honorary doctorate on him. The country's president takes the wheel of his Mercedes S 600 and chauffeurs him in person to a restaurant, cruising at 140 kilometers per hour (87 mph) and calling his passenger simply "Mr. President." José Manuel Barroso, the president of the European Commission, commands the respect one would accord Europe's premier politician.
Still, to get that respect, he has to take a long flight to a small country in the Caucasus. The man calling him one of the world's most powerful politicians is the rector of Baku State University, and the president driving him around is Ilham Aliyev. In Azerbaijan, Barroso is a great man.
' Brussels Is in Charge'
That's how things were for Barroso last Thursday and Friday. But last Wednesday was a different story. On that day, after giving a press conference at home in Brussels, Barroso was rebuked like a naughty schoolboy. Barroso had suggested expanding the euro rescue fund. German Chancellor Angela Merkel snarled back that, for the time being, that wasn't even up for debate.
Merkel wants things to calm down. She doesn't want financial markets to be constantly confronted with the euro crisis. And that's why she's downright angry with Barroso. He doesn't plan on giving in, however. He has tasked his Commission with devising a comprehensive plan for optimizing the rescue fund.
In what amounts to a swipe at Merkel and the other government leaders who have been dominating crisis-related policies, German EU Energy Commissioner Günther Oettinger also supports his Brussels-based boss. "Reactions during the euro crisis have been too slow in coming," he told SPIEGEL. "For that reason, I favor a policy that is forward-looking and perhaps even a bit provocative. Brussels is in charge, and it's Barroso's job to push things through." Such comments have to be particularly annoying for Merkel, especially since it was she who sent Oettinger, a fellow member of her conservative Christian Democratic Union (CDU), to Brussels.
This has triggered the latest power struggle in the fight to save the euro. Until now, it was the individual euro-zone countries wrangling amongst themselves. But now Barroso has seized the reins. The man with a reputation for being more of a pussycat than a lion suddenly wants to be the savior of the euro.
Barroso has now pitted himself against Merkel, and the fight is being watched by an anxious and critical audience that is made up on the one hand of the EU citizens, who especially in Greece are worried about their living standards and are constantly taking to the streets in fresh protests. The audience also includes the financial markets. If they start feeling like the Europeans can't get a grip on their problems, they can cause entire countries to teeter and the euro to crash. Under these circumstances, the issue is whether European democracy can function under the gaze of such executioners.
The Berlaymont Coup
The power struggle between Brussels and Berlin started last Wednesday. Barroso was in high spirits when he faced reporters in the"Berlaymont," the European Commission headquarters, he was in high spirits. Together with European Currency Commissioner Olli Rehn, Barroso presented the EU's first Annual Growth Survey meant to mark "a new phase in European integration."
The report serves as the foundation for the budget planning of several EU member states. From now on, governments will have to submit their draft budget proposals to Brussels for evaluation before they are even discussed by national parliaments. This follows a decision taken by the member states themselves. It means more power for the Commission, more power for Europe and a small step in the direction of a common fiscal policy.
"Read the document," Barroso proudly told reporters. "It's not the usual exercise in diplomacy; it is clear and crisp." He did not promise too much. But one sentence in particular really got Berlin's blood boiling: "We consider that its effective financing capacity must be reinforced and the scope of its activities widened," Barroso said, referring to the European Financial Stability Facility (EFSF), which makes up a large part of the euro rescue fund.
When Merkel heard what Barroso had said, she became angry. She has nothing against an expanded rescue fund in principle -- as long as it is necessary. To date, not even 10 percent of its capacity has been pledged. Still, Merkel thought the announcement was badly timed. On Wednesday, Portugal had successfully issued new 10-year bonds and Merkel was hopeful that the measures being taken to contain the crisis were working. She also feared that Barroso's plans could re-inject fear into the markets.
She didn't telephone Barroso to share her rage in person. But, according to sources close to her, "he was informed."
What Would Merkel Do?
The next day, on Thursday, Barroso took a small jet from Brussels to Azerbaijan. In Baku, with Energy Commissioner Oettinger at his side, he signed a memorandum of understanding aimed at guaranteeing access for Europe to the natural gas supplies of the Caspian region.
After having dinner with President Aliyev, Barroso retired for the night. Although he preferred to not to comment on Merkel's criticism at all, he agreed to meet with SPIEGEL at 10:30 p.m. in his suite in the Azerbaijani guesthouse. Barroso sat on a couch. He had replaced his suit jacket with a dark-blue sweater.
Asked whether he could understand Merkel's criticisms, Barroso thought for a while and then smiled. "Germany is the largest economy of the euro zone, in fact, of the European Union," he says. "I understand the specifics of the Germany debate in the euro crisis very well."
That was a diplomatic start. But over the course of the conversation he also revealed his disappointment. He said he had done a lot of things that Merkel should have approved of. As he saw it, the Annual Growth Survey he presented Wednesday largely embraced German views on fiscal policy. He pointed out, for example, that the document stressed the need for "rigorous budget consolidation" by member states.
Barroso had pushed this line through at a late-night meeting against the resistance of several EU commissioners. Michel Barnier, the French European Union commissioner for internal market and services, warned that it might be asking too much from heavily indebted countries, such as Greece, Portugal and Spain. But Barroso refused to budge -- just the way Merkel would want him to.
Consequently, Barroso found Merkel's criticism unjustified. He said this wasn't about Germany transferring money. Instead, the real issue was to have member states make guarantees high enough to allow the rescue fund to gain the maximum amount of credibility on the financial markets.
Barroso was particularly upset about the fact that members of Merkel's conservative Christian Democratic Union (CDU) in the European Parliament had accused him of unsettling financial markets. He sat forward on the edge of the couch and was gesturing wildly. For starters, he asked, didn't the markets respond positively to his statements? And then he pointed out that Spain and Italy also followed Portugal's lead last week by auctioning off fresh state bonds without a hitch.
He had done so much for Merkel. For example, last year, when she was dragging her feet about offering financial support to Greece, he asked the other member states to show understanding for Germany's position. He explained to them that Germany's Federal Constitutional Court was strict about making sure that the European treaties weren't breached. Likewise, in keeping with Merkel's wishes, he campaigned to extend EU subsidies for German coal until 2018. In doing so, he even thwarted his own Commission who wanted to phase out the subsidies even earlier.
In fact, Barroso can't really explain why Merkel responded so harshly to what he said at the press conference. When it comes to the issues themselves, Barroso believes that Merkel is on his side. As proof, he cites an article from that day's Financial Times claiming that Berlin actually does support Barroso's initiative. Indeed, he says he has "absolutely no doubt that Germany and its chancellor are determined to defend the stability of the euro zone."
Still, Barroso is not prepared to cede the discussion to the member states. In a speech before the European Parliament in Strasbourg on the state of the European Union, he had already criticized its increasing "intergovernmentalism." During the conversation with SPIEGEL in Baku, he said: "I expect the leading German politicians to accept the Commission's role." He added: "We in the Commission have not only the right but also the duty to tell Europe's citizens what we consider to be right."
- Part 1: Barroso's Struggle to Escape Merkel's Shadow
- Part 2: Merkel's Man in Brussels