Europe

Angela Merkel: Germany's 'Frau Nein'

German Chancellor Angela Merkel with French President Nicolas Sarkozy (5 Dec 2011)

When Margaret Thatcher wanted to show how she certainly wouldn't be caving in to any outside pressure, she just stood in front of a battery of television cameras, looked them straight in the lens and said: "The lady is not for turning".

Chancellor Merkel has a different style but her intransigence seems comparable.

She's "Madame Non" in French papers. "The Iron Chancellor" grabs the headline writers. And "Frau Nein" is a favourite, too.

And as she heads to yet another summit billed as the one to save the euro, she's made it as plain as the Brandenburg Gate that there will be no open-ended collective commitment to pay the debts of individual countries in the eurozone.

"We reject the idea of eurobonds", she said after Monday's meeting with President Sarkozy.

On Friday she told the German parliament: "Whoever hasn't understood that eurobonds can't be used as emergency measures in this crisis, doesn't understand the essence of this crisis."

Hyper-inflation

For her, the crisis is essentially about the failure of countries to keep their finances in order. And anything which takes the heat off undisciplined spenders only perpetuates the problem.

Image caption Critics argue Mrs Merkel has lacked sufficient courage

The view fits her background as a child of a Lutheran home in East Germany. In all of Germany, there is a mistrust of spending beyond your means - saving really is a virtue - and in a good Christian home in a communist state, you might expect that mistrust to be even greater.

Much is also made of the hyper-inflation of the 1920s as the seed-bed of puritan German frugality, but the post-war years when a new Germany was built from the rubble might be even more important.

The truth might be that American money under the Marshall Fund helped Germany rebuild. But the perception in Germany itself is that self-help and hard work did the job: Germans rebuilt Germany through their own efforts.

In the defeat in 1945, there were about 20 million homeless people. German cities were flattened. The folk memory (and real memory amongst older people) of physical and human annihilation is strong and makes present-day Germans view their own economic security as all-important.

Out of the rubble, the country's post-war institutions were built with the disasters in mind. The Bundesbank had an over-riding concern with inflation rather than unemployment, and its concerns were built into the European Central Bank.

And the German constitution makes strict rules about parliament determining budgets - not Brussels or anywhere else. So, under the German constitution, eurobonds might be unconstitutional.

'Too timid'

But critics of Chancellor Merkel say she has let these inward-looking concerns dictate policy. The euro, they say, has been a boon - and a boom - for Germans, but that case has not been trumpeted.

Peter Bofinger who is one of the "Five Wise Men" on the Council of Economic Experts advising the German government told the BBC: "There's always the feeling that we have to pay for others who do not make any effort.

"But in my view it's not true. If you look at the 'problem countries', they have done a lot to redress their deficits."

He thinks that Chancellor Merkel is too timid.

"That is what I see as the problem. It is difficult to convince the average German that this solidarity is needed. It needs courage to say this, and this courage is not there in a sufficient amount."

But there is another view - and that is that she is right.

According to this argument, one of her traits is a tendency, as the scientist which she once was, to pragmatism and empirical solutions. She eschews grand schemes in favour of detailed analyses and unflashy but effective steps.

In this crisis, she has repeatedly said that there will be no single solution - it is "step-by-step". It is a marathon, as she put it to the German parliament last Friday.

'Quiet change of stance'

So, her defenders say, it is a matter of sorting out different parts of the problem. The evidence in her favour at the moment is that the financial markets are accepting that.

What may be happening is a quiet change of stance.

The firmness against blanket bailouts remains; eurobonds will not happen. But that doesn't mean that the policy of the European Central Bank hasn't softened - and with the agreement of Germany.

The choreography may be this: Germany pushes through tougher controls on the tax and spending policies of eurozone countries.

And then the European Central Bank, under the new management of Signor Draghi, indicates it will be more amenable to buying the debt of countries in difficulty.

It's a series of step-by-step measures: sort out the politics and then help with the finances.

Chancellor Merkel's pragmatism may be effective - at least for a while. The lady is not for turning - but may be weaving a circuitous route that gets her where she wants.

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