Friday, 2 July 2010

Angie takes a licking, but will she keep on ticking?

Angela Merkel may be riding high on the world stage, but at home in Germany she is in trouble. Deep trouble. Already heavily battered by her decision to provide money to Greece to prevent the euro collapsing, her current efforts to make drastic austerity cuts to the German budget caused a major revolt this week within her governing coalition.

The German parliament is this week voting to select a new president for the country. It's a largely ceremonial position, roughly equivalent to the Queen of England bar for the fact that nobody outside of Germany would know who their president is. Ordinarily the leader of the party in power selects the president, because he or she controls the majority of votes in the parliament. Merkel's selection was Lower Saxony governor Christian Wulff, perceived by the public as a rather uninspiring career politician.

But unlike most votes in the German parliament, the vote for a president is a secret ballot. This gave backbenchers within her governing coalition, an alliance of her centre-right Christian Democrats with the free-market Liberal party, the chance to register their discontent with Merkel's efforts to make €80 billion worth of cuts to the German economy, following the larger trend of European austerity budgets. They could also show their dissatisfaction with Merkel's leadership, which has been hesitant and slow-to-react of late, as well as with the arrangements of the coalition between the two parties. Before the vote it was predicted that perhaps a dozen of her MPs would vote against her candidate in favour of the far more popular national hero Joaquim Gauck. But in the first round of voting a shocking 44 MPs voted against Merkel's candidate  Wednesday, forcing a second round of voting. Merkel lost again in the second round, and it was only in the third round of voting on Thursday, after a desperate plea for unity from her and her coalition partner Guido Westerwelle, that her coalition reluctantly fell into line.

Political analysts are still trying to figure out what the political ramifications of Merkel's humiliation will be. The vote follows a string of resignations for the Christian Democrats, including the resignation of the previous president Horst Koehler after he made comments in Afghanistan suggesting that NATO was there to gain access to resources (and, he implied, that is a good thing for Germany). It also follows the defeat of her party in recent regional elections.

It seems certain that Merkel will now have to tone down her proposed €80 billion plan for cuts to show she is listening to her coalition. That will likely send the euro tumbling this summer, as currency traders were looking for an austerity budget from Germany to allay their fears. If Germany scales back its austerity ambitions, France may follow suit.

But there could be even more serious repercussions for Merkel. There are now growing calls for Merkel to call a confidence motion, the step usually taken by a prime minister in a parliamentary democracy when it is suspected they have lost the support of their party. Most insiders in Berlin are saying she would probably win such a confidence motion, but such votes are always risky. But one may be necessary to reinforce her leadership and to demonstrate she still commands the loyalty of her coalition. Otherwise, any decisions she takes at this point could appear illegitimate.

It's going to be a rocky few months for Merkel as she tries to balance the needs of the global financial markets with her own political survival at home. A less skilled politician would likely buckle under the pressure. But Merkel has made a career out of defying people's underestimation of her, and I suspect she will do so again now.

Speaking of Germany, I'm about to hop on a train to head over there myself. I'm going to Cologne for the weekend, staying with my opera singer friend who lives there. Should be a fun weekend.

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