There is another “Iron Lady” on the other side of the Atlantic Ocean.
That nickname, given to Britain’s Margaret Thatcher, is being shared by Germany Chancellor Angela Merkel, according to European press reports. Merkel and Germany hold the key to resolution of Europe’s economic crisis. Germany has the strongest economy in Europe, and its assistance is vital to keeping other countries financially afloat. Merkel certainly is respected, but her tone has not made her overly popular.
Merkel has been especially firm with Europe’s No.1 problem — Greece. Last month she said that if Greece does not honor its obligation to cut back on government spending, “it will not be possible to pay out the next tranche,” of the money Greece needs to avoid a financial collapse.
In addition to the “Iron Lady,” some in Europe have taken to calling Merkel “the school mistress.” She followed Spain’s efforts at monetary reform “with exceptional attention,” and when the negotiations were complete, she praised Spain’s Minister President Mariano Roy. She called the agreement with labor unions in which salary and benefits were decoupled from inflation “magnificent.” Her words were taken as a blessing by Spaniards and others in the European Community. Interestingly, Germany’s major newspaper noted that the feat was nothing new. Said the Frankfurter Allgemeine Zeitung, “Such agreements had been commonplace for a long time; presidents and leaders from France, Italy, Austria, Portugal, and Belgium had already submitted their reports.”
On Jan. 30, the EU’s leaders met in Brussels for a special summit. In this case, Merkel did not talk just about spending, although that was important. Instead she emphasized “growth and industry.” She was clearly focusing on “painful reforms along the lines of the German model — a German program for the entire continent. Merkel’s advisers argued that they did not expect everyone in Europe to follow the German lead, maintaining that other governments know their weaknesses and strengths. However, it is noteworthy that Merkel has been repeating at every opportunity the importance of the economic reforms instituted under her predecessor, Gerhard Schroeder. “These reforms have been in effect only 2-3 years, and today we have less that 3 million unemployed.”
Merkel seems happy with her new role in Europe. She said, “We in Europe are at a point where our external policy slowly overtakes our internal policies.” Indeed, she believes the problems Europe faces can no longer be dealt with diplomatically.
She also showed she was prepared to be undiplomatic. Merkel proposed creating a “budget commissar,” who would watch over how Athens handles its money in return for a new 130 billion euro bailout. The Greeks were outraged. Greece’s finance minister, Evanglos Venizelos, said such an arrangement would force Greece to choose between financial assistance and “national dignity.” He claimed that the EU already had sufficient monitoring safeguards in place.
Merkel is in a strong position domestically. German are tired of hearing the Greeks complain about the austerity measures the EU demands, and many regard Greece’s predicament as Greece’s fault. To the average German, Greeks don’t work hard and yet seem to expect the rest of Europe to subsidize their life style. Instead, most Germans believe it is about time someone forced the Greeks to begin earning a living and stop expecting Germany to constantly bail them out of the consequences of their social welfare system.
It is unclear how the EU will solve Greece’s financial problems. Nor is it certain that a deal with Greece will solve the EU’s problems. Portugal appears about to follow Greece into insolvency, and some Belgian workers are striking over wage cuts. Even France, led by Merkel’s all,y President Nicolas Sarkozy, is experiencing serious financial problems. Germany, however, is doing just fine.
Merkel has become the most powerful political and economic figure in Europe, where international and domestic worlds are increasingly interlocked. Ironically, one now hears complaints from countries like Greece that the Germans will accomplish financially what they couldn’t do militarily in World War II. Maybe that is true, but whose fault is it? In my view, the Greeks should look in the mirror.
Dale R. Herspring, a University Distinguished Professor, and a member of the Council on Foreign Relations, is a retired U.S. diplomat and Navy captain.