After five years of austerity the European Union is today riven by cultural, political and, increasingly, nationalistic divisions that may be coming to a head in the clash between Athens and Berlin. By Ian Traynor, Europe editor / The Guardian

 

She may be more associated with its horrors than any other politician in Europe, but Angela Merkel hates austerity. The word, that is. The crisis gave German the ugly term Austerität. When the German chancellor pronounces it, she wrinkles her nose in distaste, affects incomprehension, seeks distance from it.

Sparsamkeit, or thrift, is more her thing. Merkel sees that as an old-fashioned household virtue, which she has elevated into national and European policy. But when it comes to the formula that Europe needs most of all, Merkel’s magic word is “competitiveness”. The belt-tightening, in Greece as almost everywhere else, is but a means to that end.

Fine if it is working. And if it’s not? In Greece, the cradle of European democracy and the crucible of European crisis, the election of Alexis Tsipras – seen alternately as a hard left demagogue or as the nemesis of a deeply corrupt entrenched political class – suggests not.

“Greece’s election has already produced an unambiguous defeat for Merkel and her austerity-based strategy for sustaining the euro,” Joschka Fischer, the former German foreign minister, wrote this week.

The results in Greece are a society traumatised, elites untouched and taking their money out of the country, no jobs for the young, national output shrunk by a quarter, national debt soaring to levels where it can only be serviced by sacrificing any prospect of recovery. Five years into what in Brussels is dubbed “the programme”, Greece is not competitive. It has the EU’s first government of hard-left rebels and rightwing antisemitic nationalists.

Has Merkel failed? The Germans angrily reject the very premise of the question, arguing persuasively that they did not create the mess in the first place and responded generously by taking the lion’s share of bailing out Greece to the tune of €240bn (£181bn), the biggest rescue ever of an insolvent state.

But it has not been a good few weeks for the German leader. Last month the European court of justice dismissed German contentions that Mario Draghi’s pledge to do whatever was necessary to save the euro single currency was illegal. Draghi, the head of the European Central Bank, then launched a policy that is anathema to German monetarists – printing money to buy up a trillion euros of government bonds.

“Not only she, but a large part of the German political, policy, economics and intellectual establishment was vehemently opposed to the ECB’s move,” noted the Centre for European Reform thinktank.

The election of Tsipras and the return of the euro crisis made it a hat-trick, a 3-0 defeat for Berlin.

Greece is scarred and battered, France is depressed, Italy is angst-ridden, Spain is in revolt. But the crisis has largely passed Germany by. Merkel is in her third term and her personal ratings are high while almost all incumbents in the eurozone have been kicked out of office since 2010.

So Merkel, it is generally agreed, has had a good crisis. But this is not quite accurate. Her concessions have been huge, delivered through gritted teeth. From the very start of the crisis in 2010, all of the big strategic policy responses made to save the currency entailed decisions fiercely opposed by Germany.

The first big decision was whether to have bailouts at all. Berlin believed that was illegal and that even in a common currency, every country had to look after itself without the support of the others. But Merkel had to yield to the pressure from the markets, the banks, the other governments and agree to what became a €750bn pot for saving countries from Greece to Ireland.

Her second big setback came in the summer of 2012 when France, Italy and Spain – with the US and the UK quietly egging them on – ambushed Merkel at a Brussels summit and laid the foundations for what is now known as the eurozone’s “banking union”, creating a single supervisor and setting centralised rules for the currency area’s banks.

The Germans fiercely resisted this and lost. Draghi’s bond-buying spree unveiled last month, known as quantitative easing, is the third major policy defeat, ending the illusion that the ECB was established in the first place as a clone of Germany’s Bundesbank which could never embark on such a policy.

If Germany lost the big battles, it compensated by dictating the terms of its defeats. Yes, there would be bailouts, but Berlin determined the detail of how they worked and the conditions the debtors would need to meet. Ditto with the banking union. Having grudgingly agreed to the single supervisor, German energy went into shaping and dominating the fine print of how the new system would work.

These conflicts reflected fundamentally different ways of seeing things, deep cultural divisions between the big nations of Europe over how budgets and economic policy work. It has often been a dialogue of the deaf, an exercise in mutual misunderstanding.

“I never discuss economic policy with Germans,” jokes a senior eurozone official in Brussels, “because for them it’s not about economics, it’s religion.”

Five years on, these basic differences in outlook have not been resolved and may be coming to a head in the clash between Athens and Berlin.

The Greek people have spoken and delivered a resounding no to Germany, Tsipras argues. He is quietly supported by France’s François Hollande and Italy’s Matteo Renzi, both of whom argue for “a Europe moving in a different direction” but who are reluctant to pick a fight with Merkel openly and hope Tsipras can tilt the balance of power in their favour.

“Tsipras might help in the short-term to challenge Merkel,” says an Italian government official. “But not for very long.”

But the Germans are far from alone in stressing the primacy of cuts, sound budgets, lower borrowing and structural reforms as the solution.

The Baltic states, Latvia particularly, have been through their own wrenching austerity and have little sympathy for Athens. The Dutch and the Slovaks are unsupportive too. Finland goes to the polls in April and for the prime minister, Alex Stubb, says a government minister from an EU state, “there are no votes in being nice to the Greeks”.

“The rest of Europe cannot finance Tsipras’s election pledges,” quipped Martin Schulz, the president of the European parliament, after being the first senior EU figure to see the new Greek prime minister in Athens last week.

Jyrki Katainen, vice-president of the European commission and a former Finnish prime minister, went further: “We don’t change policies depending on elections.”

In other words, governments may come and go, people may vote for whoever they like, but the policies remain the same. This highlights the intractable problem at the core of the conflict – how to reconcile democracy in one country within a monetary union of 19 countries.

The politics of the eurozone now vary hugely from country to country. Five years of crisis have produced tectonic shifts in the politics of Greece, Spain, or Italy. And the conflicts are now political and national, rather than narrowly financial or left-right fights about economics.

“It started out ideological, but now it’s national, between nations,” said the Italian government official.

In Greece, Tsipras’ savaging of the bailout regime is not new. The same arguments were being made by Antonis Samaras on the centre-right until he became prime minister in 2012. Hollande’s centre-left views on the euro crisis barely differ from those of his predecessor, Nicolas Sarkozy, on the centre-right. Merkel’s euro policies have consistently won support in the Bundestag from the social democrats and the Greens.

Almost everywhere the positions are national. These unresolved differences between countries are poisoning the politics of Europe. They can easily and quickly shift into nationalism.

“There is a lack of trust between our leaders,” said a senior European commission official.

In Italy, France, Greece and elsewhere it is now common to hear bitter denunciation of the Germans along the lines that the EU’s dominant power thinks it is saving Europe when in fact it is destroying it.

Much of the German media reaction to the Tsipras triumph has been to harrumph, complain about a “German nightmare”, and tell Merkel “we told you so” – tens of billions of German taxpayers’ money down the drain.

Even senior diplomats in Brussels now say that Germany is no longer Europe’s “reluctant hegemon”, but is much more at ease than previously in calling the shots.

Merkel is admired and feared. Indeed in the psycho-politics of current European leadership, it often seems that all the key male figures crave Merkel’s attention and approval.

David Cameron’s strategy for rewriting the terms of Britain’s EU membership appears to rest frequently on one strand, gaining Merkel’s support. But at least twice in the last year, she jilted him.

A quartet of Italian prime ministers, Silvio Berlusconi, Mario Monti, Enrico Letta, and now Renzi, all sought to woo the German leader. She helped depose Berlusconi, did little to help Monti, and Renzi, say senior sources, irritates her because of his brashness, as Sarkozy did before.

This week Merkel went to Hungary to see the EU’s most authoritarian prime minister, Viktor Orban. He told John McCain, the US senator, last year that Merkel was the only politician who mattered in the EU, Budapest sources said. Even Russia’s president, Vladimir Putin, has staked his Ukrainian diplomacy on winning over Merkel. But she no longer believes a word he says.

“Merkel is no less narcissistic or egotistical than politicians elsewhere,” observed the risk analysts at Eurasia Group last week.

Now it is Alexis Tsipras’ turn to try and win over the German chancellor, because without her acquiescence Greece is doomed. He is touring Europe this week – Nicosia, Rome, Paris, and Brussels on Wednesday. Berlin was not included and the Tsipras camp made it clear that he would not ask for an audience with Merkel. Or not yet.

In France, Italy, the Netherlands, and Britain the new nationalism is demonstrated by the rise of strong anti-European forces that are influencing policies on the euro, on immigration, on Islam, while peddling anti-German stereotypes.

Germany has always been the exception here, solidly pro-EU, seemingly immune to the appeal of hard-left and far-right populism. But that is also changing. Merkel is now accosted by the German nationalist anti-euro Alternative for Germany party and by the nationalist marches against “Islamification” of recent months.

This narrows her room for manoeuvre on what to do about Greece and will feed her wariness about making too many concessions because the Greek dilemma might escalate into something much bigger. If German public opinion joins much of the rest of Europe in turning against the EU, Merkel’s leadership will be questioned and tested as seldom before.

“This is a crucial moment for the way Europe is going to move ahead,” said a senior EU official. “Merkel has to think about her political position. If there is no change, don’t be surprised if people reject Europe.”

Source: www.theguardian.com