Weakened Merkel puts Germany before Greece

ConservativeInternational last looked at Angela Merkel's fortunes at the end of January. Problems with her new FDP coalition partners were already emerging then. Her government's fortunes have got worse since.

Guido Westerwelle, the leader of the FDP and her junior coalition partner, has seen his party's popularity halve since becoming German Foreign Minister.  62% of voters tell pollsters that the conservatives of the CDU and the liberals of the FDP "simply don't fit together". This, in part, reflects disagreements over fiscal policy. the FDP want large tax cuts while Merkel prioritises a smaller deficit. Westerwelle's more Thatcherite also offends the CDU's social market beliefs.  The Economist reported a poll for the German Banking Federation which found 61% of voters wanting more social protection and just 23% favouring a more market-based approach.

As the Merkel-Westerwelle relationship sours The Independent's Mary Dejevsky noted that active consideration is being given to a CDU-Green coalition. The Economist speculates about the same:

"The CDU’s origins are in the Catholic Centre Party of pre-war Germany, the Greens’ in the protest movements of the 1960s. But the CDU has embraced environmentalism, and today’s Greens are mostly prosperous burghers with a liberal bent. Entrepreneurs in Baden-Württemberg, another candidate for such a coalition, vote CDU but their wives are often Green, says Winfried Kretschmann, the party’s parliamentary leader in the state. Such a partnership would be harder to forge at federal level, but Mrs Merkel might like to have a go. Whatever the colour of the coalition, she intends to head it."

The big immediate issue in German politics is the possibility of a Greek bailout. The German people were never enthusiastic about giving up the Bundesbank and Deutsche Mark and they're even less keen on bailing out Greece now, against their better judgment, that they're in the Euro.  The latest FT/Harris poll showed 61% of German voters oppose the idea of their government helping Greece.  Just 20% are supportive*.   

According to The Guardian, "Merkel is concerned that a Greek bailout would set a dangerous precedent and again raised the controversial view that countries that persistently broke the EU's stability and growth pact could be expelled." If the expulsion option is not to be introduced then eurozone members will have to coordinate fiscal policies more stringently. The Guardian notes what Eurosceptics have always argued: monetary co-operation necessitates fiscal co-ordination which, in turn, necessitates closer political ties:

"The Greek crisis has highlighted the fact that without stronger political ties between countries, it is very difficult for the economic ties within the eurozone to be maintained in times of difficulty. Olli Rehn, the European commissioner responsible for economic and monetary affairs, said in an interview at the weekend that the commission should be involved in the future planning of eurozone national budgets "in order to identify bad developments in good time"."

A German leader from the post-WWII generation might have been willing to upset domestic concerns and help Greece in the name of 'Europe'. But, says Newsweek, Merkel is not part of that generation:

"For leaders of Merkel's generation, European unification is no longer a matter of war and peace, a moral imperative grown out of the deadly conflicts of the 20th century, as it was for Kohl. Why should Germans pay for Greeks (or Spaniards, or Portuguese) living it up on a mountain of public and private debt, while Germans have gone through a decade of painful reforms, tax hikes, and stagnating wages?"

* "That compared with 56 per cent opposed to helping and 21 per cent in favour in the UK. Support for Greece was noticeably higher in Spain and Italy, where 45 per cent and 40 per cent were in favour."