Greece Situation

Crises to Test Merkel’s Stoicism

EU and Greek flags reuters DISTORTED
The European Union will persist, with or without Greece.
  • Why it matters

    Why it matters

    If Greece leaves the euro zone, other crisis countries such as Portugal, Spain and Ireland could be vulnerable.

  • Facts

    Facts

    • Greece exited its bailout program at midnight on Tuesday.
    • The country holds a referendum on Sunday, regarded as a vote on its euro membership.
    • Ms. Merkel has said she will await the result before any more negotiations with Greece.
  • Audio

    Audio

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“If the euro fails, then Europe fails.”

Time and again during the financial crisis and efforts to bail out Greece, that phrase has been German Chancellor Angela Merkel’s bulwark. In the coming weeks and months she will be measured by her mantra: Will her euro-crisis strategy of the last five years prove viable? Can the euro zone survive if Greece leaves?

German citizens have high expectations for Ms. Merkel’s promises. The firewalls that have been put up around the currency by politicians and the European Central Bank must hold strong if the chancellor is not to fail. In addition to the European Stability Mechanism, ECB President Mario Draghi has promised to do “whatever it takes” to prevent crisis countries like Portugal, Spain or Ireland from being dragged into the abyss again.

In a sense, these firewalls also stand to protect the chancellor’s political legacy.

The success of Ms. Merkel’s bailout policies is verifiable in Spain, Ireland and, with some limitations, also in Portugal. Furthermore, no one still talks about Italy and France as possible bailout candidates, as some did a year and a half ago.

So there can’t be any talk yet of a complete failure of these crisis mechanisms. And yet financial markets will not wait long to attack the euro zone’s stability. They will no doubt test how strong the member states really are.

A good indication of how Ms. Merkel may act in the future is the way she reacted to the financial crisis of 2008 after the Lehman collapse. At the time, Ms. Merkel and her then-finance minister, Peer Steinbrück, guaranteed citizens their savings deposits.

Chancellor Merkel does not want to give up the basic principles of the euro zone. Europe lives on reliability, credibility and solidarity.

On Monday, Ms. Merkel and her vice chancellor, Sigmar Gabriel, made a commitment to the euro and to its regulations.

“We could perhaps give it up short term,” she said. “Mid- and long term, we would be damaged.”

But in every danger there is also opportunity. Ms. Merkel can, in retrospect, claim with some justification that Germany emerged stronger from the Lehman crisis. In contrast to almost all other industrial nations, Germany is doing well. Unemployment is low and the budget will be balanced again in 2016.

Perhaps, therefore, the Greek crisis will also have an upside – because it offers the chance to consolidate the currency union and, in the end, make the euro zone even stronger.

What Ms. Merkel built in five years of working to stabilize the euro zone, Greek prime minister, Alexis Tsipras, ruined in five months. Where there was no will on the side of the Greek government, there was also no way even for Ms. Merkel.

“If the ability to find compromises in the European Union are lost, then Europe is also lost,” she said on Monday, at the 70th anniversary celebration of her center-right Christian Democratic Union.

She directed her comments toward Athens, but did not shut the door completely.

Chancellor Merkel does not want to give up the basic principles of the euro zone. Europe lives on reliability, credibility and solidarity, she said. To read contempt toward Mr. Tsipras into her comments would be exaggerated. Yet, she is certainly annoyed and disappointed over unsuccessful attempts to find a compromise.

Comparisons don’t always work, of course. And yet on the German side, if Gregor Gysi of Left Party were chancellor – with leftist colleague Sahra Wagenknecht as finance minister and Bernd Lucke of the euro-skeptic Alternative for Germany party as foreign minister – then ideology rather than state politics would be the decisive factor.

Greeces Debts-01

In these uneasy times, the chancellor remains unchanged. Greece staggers into the abyss. Europe is in shock. And Ms. Merkel?

She appears stoically calm amid the great agitation.

If, for example, there is a big dip on the stock markets, that would be the first indication of the end of the euro zone. Yet Ms. Merkel continues with politics, after the historical break on Friday, when the financial ministers had to end negotiations with Athens.

Minor political figures were quick to pipe up after the Greek government called for a referendum on its bailout deal. On the other hand, Ms. Merkel and Mario Draghi refrained from giving an evaluation over the weekend.

Now we can only hope that the Greek people will be more sensible at the referendum on Sunday than their government has been. Otherwise, the firewalls that protect the euro zone – and Ms. Merkel – will be tested.


To contact him: sigmund@handelsblatt.com

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