Germany’s Parliament had the opportunity to scuttle Europe on Thursday when it voted on Chancellor Angela Merkel’s plan for a stronger euro bailout fund. They took one, long hard look over the abyss – and uncharacteristically backed Merkel. Had the vote gone against the chancellor, not only would she have followed other politicians with bold regional plans that were punctured by home politics, but Greece would have probably found itself with default as the only option left on the table. Who knows what would have happened to Europe after that? Merkel, along with every nervous market watcher, will sleep just a little easier now. By SIPHO HLONGWANE.
It’s not often that German chancellor Angela Merkel wins a famous victory on her own turf. Not since the world economy went belly-up, anyway.
Which is odd, considering how vocal she is on the European stage.
On 4 September, Merkel’s Christian Democrat party suffered a stinging loss in her home state of Mecklenburg-Western Pomerania as it lost regional elections to the Social Democratic party. The Christian Democrat electoral support in the region dropped from 29% in 2006 to 24,9% this year. The Free Democrats, a national ally to Merkel but an opposition party in the provinces, only managed a paltry 3% in the election.
The loss was largely interpreted to mean that German citizens were unhappy with how Merkel’s government was handling the euro crisis. At the time, the sentiment was that industrious and prudent France and Germany were wasting their riches by bailing out the spendthrift nations of Greece, Spain, Italy and Ireland.
Then Germany realised that, like Himalayan mountain climbers, it is tethered to Greece by the eurozone rope. If the Greeks go over the abyss, chances are the Spanish, Italians and Portuguese will follow. And if the PIIGS go over the cliff, Europe follows.
So really, bailing the weakling Greece would be bailing out the giant Germany.
This was the choice that German lawmakers faced on Thursday when they went to the ballot to decide whether or not to increase the size of the European Financial Stability Facility, a fund established by the EU to rescue weak continental economies that were exposed by the global financial downturn.
The temptation to screw Merkel over can’t have been small. Her government is a shaky coalition, cobbling together small parties that routinely squabble on the local stage.
Ultimately though, German MPs decided that saving Europe was more important than political point-scoring.
“Of 611 MPs present in a highly-charged sitting at the Bundestag on Thursday morning, 523 voted in favour of expanding the powers of the European Financial Stability Facility (EFSF),” the Guardian said. “Under the plan, the EFSF will be enlarged to €440 billion (£382 billion). It will also be given the ability to give ‘precautionary loans’ to struggling European countries, buy EU government debt, and provide funding to shore up the capital reserves of European banks.”
Ultimately, Merkel’s coalition partners came to the table, meaning that an appeal to opposition members to support the bill wasn’t necessary. Some analysts said that such an appeal, if it failed, would have brought the German government to its knees.
Germany’s Upper House is expected to pass the measure on Friday.
The EFSF has now been given the power to save Greece long before it defaults.
However, Europe and, by extension, Germany, is far from being out of the woods.
For one, the markets haven’t exactly reacted with jubilation at the news that the strongest European economy voted for a stronger EFSF. Several crucial indicator stocks, like raw materials, retreated despite the news.
“The Stoxx Europe 600 Index slipped less than 0.1 percent to 227.3 at 12:49 p.m. in London, having swung between gains and losses at least 12 times,” Bloomberg BusinessWeek said. “The measure is heading for its worst quarter since 2008, having fallen 17 percent amid concern global economic growth is slowing and policy makers are struggling to contain the European debt crisis. The gauge has dropped 4.3 percent this month following a 10 percent slump in August.”
The general market sentiment of wait-and-see still prevails.
On a personal note for Merkel, she will be happy not to join the ignoble ranks of political leaders who made big international splashes, while ultimately falling to crippling local challenges.
There is no better example of this than our own Thabo Mbeki – a man credited with bringing about peace in Burundi, and playing a major hand in Sudan’s Darfur region and the Democratic Republic of Congo – who succumbed to what amounted to a ballot-box uprising by his deputy, Jacob Zuma.
As it is, Merkel (should she manage to serve her time out) will draw more positive parallels with Bill Clinton, that other great political survivor. DM
- Europe again steps back from brink in debt crisis in Reuters;
- Germany backs revamps euro bailout fund in the Guardian;
- European stocks fluctuate as German vote fails to calm investors in Bloomberg BusinessWeek.