Tags: EU | Euroskeptic | Germany

Germany's Merkel Abandons Tax Cuts After Election Defeat

Tuesday, 11 May 2010 10:32 AM

Germany's support for the European Union has been so unflinching that it's taken for granted, but are cracks now emerging in the wake of an unpopular decision to help bail out a struggling Greece?

Voter resentment over the price of the Greek bailout helped cost Chancellor Angela Merkel her majority in the upper house this weekend in what she called a "bitter defeat" for her party, and the country's media have kicked up a storm over paying for other Europeans' mistakes.

On Monday, Merkel had to tell her shrinking constituency that thanks to the financial crisis and an increasingly tight budget she was abandoning her hopes of pushing through tax cuts — even as she pledged to support a new rescue package for the euro zone.

Now some are wondering whether domestic pressure might push Merkel away from the European Union at a time when it desperately needs leadership.

"The country's political elite is still wedded to the European project even though Germany is no longer willing to pay over the odds to make European compromises possible," said Katinka Barysch, an analyst at the London-based Centre for European Reform think tank, in a research note.

"The risk is that the Greek crisis brings a latent sense of frustration and disillusionment with the EU to the boil", she said. "It is hard to see how the EU could make progress on anything ... with a reluctant, grumpy and inward-looking Germany at its heart."

But political analysts in Germany say it is unlikely Merkel will turn away from Brussels, because general European problems are closely linked to those in Germany — the continent's biggest economy.

"The overarching European problems are, of course, also mainly interior problems," said Heinrich Oberreuter, a political scientist who teaches at the University of Passau.

Merkel has also demonstrated that she is extremely pragmatic which means she will be naturally inclined to keep the "gigantic euro crisis" at the top of her political agenda, said Roland Sturm of Erlangen University.

"She tends to react to the biggest problems," Sturm told The Associated Press. "And at this point, foreign policy seems to call for the most attention."

It is not even clear how much the Greece crisis and Merkel's handling of it contributed to her conservative Christian Democratic Union's losses in the North Rhine-Westphalia state election Sunday, he said.

While many voters are voicing increasing skepticism about the EU bureaucracy's power over their lives, almost all major parties have shared the mantra-like support for the EU.

"There has been no differing position on Greece" in the lead-up to the state election, Sturm said, adding that even the opposition parties in the end agreed helping Greece was needed.

On Monday, Social Democratic opposition leader Sigmar Gabriel even suggested that Merkel was not involved enough on the European level.

"Just leaving open Germany's position (on Greece) led to speculation continuing to run wild," Gabriel said. Germany "has got into a very, very difficult situation thanks to its do-nothing government."

More than anything, Merkel's indecision in general since September elections has been losing her voters, Oberreuter said.

"It is her way of governing, or rather not governing, of wavering, of letting things go a long time before taking action," he said.

Sturm said Merkel also may have misjudged the currency crisis as a "Greek problem" in the beginning, and then not wanted to acknowledge an enormous looming financial problem before the state election.

But with the election behind her, Sturm said he now expects Merkel will show greater leadership on the European level, particularly since EU president Herman van Rompuy has not stepped up.

"Van Rompuy was supposed to be the face of the European Union, but what have we heard from him in this crisis?" Sturm said.

Merkel now needs to show leadership by pushing for sustainable solutions to euro zone problems, but it is a two-way street, Barysch said.

"There were several EU countries that wanted tough conditions for Greece just as badly" as Germany, she said. "They need to stop hiding behind Berlin. Others need to acknowledge that European solidarity also requires responsibility on the part of all EU member-states."

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Germany's support for the European Union has been so unflinching that it's taken for granted, but are cracks now emerging in the wake of an unpopular decision to help bail out a struggling Greece?Voter resentment over the price of the Greek bailout helped cost Chancellor...
Tuesday, 11 May 2010 10:32 AM
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