Angela Merkel: At the Helm of EU

by Caela

British Prime Minister Gordon Brown may have saved the world financial system [sic]. French President Nicolas Sarkozy have marshalled the EU’s emergency response to the October banking crisis. But it is German Chancellor Angela Merkel who is now the European Union’s dominant figure as she leads with Germany’s economic heft.

Back on March 1, Chancellor Merkel vetoed a bailout for eastern Europe. By March 16, it was apparent that she is leading European opposition to U.S. President Barack Obama’s call for a global pump-priming package. She’ll determine the fate of a 5 billion-euro ($6.4 billion) infrastructure proposal at the ongoing EU summit in Brussels.

Chancellor Merkel’s rejection of more stimulus is the first trans-Atlantic clash of the Obama administration rebuffed President Obama’s March 11 for “concerted action around the globe to jump-start the economy” and led critics to say she risks deepening the global recession. Even as finance ministers from the Group of 20 nations were meeting in southern England March 14, seeking to paper over differences with a pledge to deliver a “sustained effort” to boost growth, Chancellor Merkel was defending her opposition to further spending.

“Germany really has contributed its share,” said Chancellor Merkel.

Chancellor Merkel’s defenders point to International Monetary Fund data that show Germany spending 2 percent of GDP to fight the recession in 2010, edging out the U.S.’s planned 1.8 percent. U.S. spending of 2 percent this year will top Germany’s 1.5 percent.

Germany has enacted two special spending packages since late last year, including 100 billion euros to boost company liquidity and 82 billion euros in measures including a premium for people who scrap old cars in order to buy new, energy- efficient vehicles.

On March 14, President Obama said there isn’t a fundamental “conflict or contradiction between the positions of the G-20 countries” on how to deal with the crisis, only “a difference in details.” Chancellor Merkel’s spokesman Thomas Steg also denied any “conflict,” calling it an “artificial debate.”

While the EU forecasts that the German economy will shrink 2.3 percent in 2009, which is the second-worst in the 16-nation euro region after Ireland, economists say its relative strength will likely re-emerge whenever the recession ebbs. Europe’s largest economy has used the 10-year-old euro to rebuild its competitiveness, and the EU’s eastward expansion in 2004 moved Germany from the edge of the European market to the center.

In January, the European Commission predicted that the economy will shrink 1.8 percent in 2009. The outlook had been gloomy with Germany’s Kiel-based IfW institute forecasting a 3.3 percent slide last week.

Chancellor Merkel played down concern that the euro region could be destabilized by rising indebtedness in countries like Spain, reeling from a downgrade in its credit rating by Standard & Poor’s in January. “At the moment we see no need for action,” said Chancellor Merkel in Berlin yesterday. “We believe that the conditions are good for the euro region to remain stable.”

Chancellor Merkel is up for a second term on Sept. 27. Her party, Christian Democrats, plumbed a two-year low in an Infratest dimap poll released March 6, with 32 percent but maintains a lead in front of German Foreign Minister Frank-Walter Steinmeier’s Social Democrats by 5 points.

“Merkel is definitely a woman to watch,” says Robert Leonardi, senior lecturer in European politics at the London School of Economics. While Sarkozy may be more flamboyant, he says, “she’s emerging more and more as a strong leader” of Europe.

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