Letter from Berlin: Merkel's Lack of Resolve Poses Risks for Germany

By SPIEGEL Staff

They call her "Madame No" in Brussels. But criticism of German Chancellor Angela Merkel's handling of the growing economic crisis has increased in Germany as well. It's been her first real test as chancellor -- and many say she is failing.

How well they get on. They greet each other with kisses on the cheek and a warm embrace, they address each other as "chère Angela" and "cher Nicolas" and they look inseparable. Merkel beams, Nicolas grins.

He does the German chancellor the honor of inviting her to his apartment to lunch with his world-famous wife Carla Bruni. And then, as soon as Angela Merkel has left, Nicolas Sarkozy makes the following remark about how the two countries are tackling the financial crisis. "France is working at it, Germany is thinking about it."

German Chancellor Angela Merkel has been heavily criticized for her handling of the growing economic crisis.
DDP

German Chancellor Angela Merkel has been heavily criticized for her handling of the growing economic crisis.

Indeed, despite appearances to the contrary, the reality is that they don't really like each other at all. Their meeting on Monday last week in Paris was in fact little more than an operetta. Once it was over and she was gone, he put the boot in, thump. And she didn't defend herself. Not a word from Angela Merkel about the staggering impertinence of Nicolas Sarkozy.

Impertinent he may be, but he's not entirely wrong. These days, Merkel is nothing like as active as the French president. Both are governing on the thin ice of the financial crisis, but Sarkozy is whistling as he turns confident pirouettes, while Merkel is crawling across the slippery surface on all fours, slowly and cautiously. Right now she's the one who looks pale, who is under fire.

It's not just Germany that's mired in crisis, it's Merkel's government. She had hoped to cruise through to the September 2009 general election and win it on her strong opinion poll results. All she had to do was stand by as the rival Social Democrat party wore itself down in perennial infighting. That was her campaign plan for next year.

Strategy of Silence

Now, though, she suddenly faces the biggest challenge of her chancellorship. She has to get Germany through the crisis. The hour of the Chancellor has chimed, but Merkel is behaving as though she hasn't heard the gong. There are no grand words or grand deeds coming from the chancellery. It's as though Merkel wants to overcome the crisis with a strategy of silence.

What other major countries are doing to avert recession.
DER SPIEGEL

What other major countries are doing to avert recession.

But is that feasible given the prospect of the worst economic downturn Germany has suffered in decades? Just a few weeks ago the experts still predicted that Europe's largest economy would deliver modest growth next year. Now they're forecasting the worst recession since World War II.

The financial crisis is paralyzing world trade and no country is set to suffer more from that development than Germany, due to its reliance on exports. The economists of the Organisation for Economic Cooperation and Development predict that Germany will be "hit hard", and that the number of people out of work will surge by 700,000 over the next two years. The downturn has already begun. Daimler plans short-time working for four German plants, steel giant ArcelorMital wants to axe 6,000 jobs in Europe, and chemicals group Akzo Nobel is bracing for a decline in demand by between 10 and 20 percent. It could turn into a downturn matching that of the Great Depression following the 1929 crash.

And what is Merkel doing? She put together a rescue package for banks that so far hasn't had much effect. She has come up with an economic stimulus package that may not be enough. She hasn't made a single major speech. There is no sign of a claim to leadership, whether in Germany, Europe or the world.

Doubts About Merkel's Crisis Management

The world is waiting for Barack Obama. Europe is looking to Nicolas Sarkozy, and in Germany there is growing doubt whether Merkel's crisis management is up to the task.

She defended her cautious stance at the annual party congress of her conservative Christian Democrats (CDU) in Stuttgart on Monday, declaring that Germany would stay out of "senseless" international competition to boost economic growth by spending billions of euros of government money.

At the congress, the CDU delegates dutifully demonstrated their support for Merkel by re-electing her as party leader with a majority of almost 95 percent. But there are growing calls in the party for tougher action to stave off recession.

Peter Müller, the CDU governor of the southwestern state of Saarland, said: "I think people are hoping for tax cuts before the end of the current term." Günther Oettinger, the governor of Baden-Württemberg, said: "If the crisis escalates I think a second stage of the economic package is conceivable." Even Interior Minister Wolfgang Schäuble, usually a loyal soul, distanced himself from Merkel by saying the CDU should now be pursuing a "demand-oriented" policy.

These politicians are following the advice of leading economists. The government-appointed panel of experts known as the "wise men", the Bundesbank central bank, the leading economic institutes, the OECD: they're all demanding that Germany take stronger action to shore up its economy. This reflects concern that Merkel isn't doing enough to avert the crisis, that she's acting too late and being too cautious. And that the recession will be worse than it needs to be as a result.

Mounting International Criticism

The international criticism is equally damning. Merkel has largely isolated Germany with her hesitation, and the consequence is that Germany is losing influence in world politics.

Her inaction is drawing fire in Paris, London, Washington, Brussels. Even her old friend, EU Commission President Jose Manuel Barroso, is angry at the chancellor for refusing to spend further billions of euros on stoking the economy. In Brussels she's now known as "Madame No." It's been a long time since a German government leader was so unpopular abroad. For Merkel, hitherto admired as the world's most powerful woman, it's a completely new experience.

Newspaper commentators around Europe are at best criticizing her policy, and at worst mocking her. Britain's Economist magazine accused her of "invisibility", and the Financial Times said Germany was adopting a "beggar thy neighbor" stance by relying on other countries to enact stimulus packages that will eventually benefit German exporters. Italian newspaper La Stampa wrote that Merkel seems "fearful and virtually petrified" by comparison with her colleagues in France and Italy. The Wall Street Journal said she lacked courage.

Steve Clemons, an influential commentator in the US Democratic camp as director of the American Strategy Program at the New America Foundation, said there had been only two impressive European contributions to solving the crisis, and they had come from Nicolas Sarkozy and British Prime Minister Gordon Brown.

Merkel had removed herself from the game with her politics of hesitation, of waiting and seeing, of small steps, said Jackson Janes, a Germany analyst at Johns Hopkins University.

Britain too isn't exactly enamoured of Merkel these days. "Against the background of Germany's traditionally weak domestic demand, her hesitation is incomprehensible," said Henning Meyer, head of the European program art the Global Policy Institute of London's Metropolitan University. Meyer, like most Anglo Saxon economists, believes that "Germany as the EU's biggest economy should take a leading role in fighting the recession."

In Paris, Merkel's reputation has taken an even greater beating than in Washington and London. According to satirical newspaper Le Canard Enchaîné, feelings towards her in the French government border on hatred.

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