All leaders have a defining moment in their careers: a time when they will either go down in history as having wasted an opportunity or having failed to act in the interests of the public or of the wider community, or the moment when they will be cemented forever in the history books as a hero, a saviour, a champion. For the Iron Chancellor of the Federal German Republic, Angela Merkel, this defining moment is undoubtedly her management of the ongoing European economic crisis.
Merkel has said that there is no quick resolution to the crisis, especially not in the timeframe leading up to the EU Summit on October 23rd. The expected ratification in the increase of powers for the European Financial Stability Facility (EFSF), the body expressly created by the European Union in May of last year to combat the sovereign debt crisis at the next summit, will inevitably be only a step in what is becoming the long haul solution to the crisis. Knowing this, Mrs Merkel should start thinking about her personal exit strategy, far off as it is.
A recent poll has found that just 15% of Germans approve of their Government’s conduct during the Eurozone crisis. That is lower than Conservative Party approval ratings after Black Wednesday and over 20% lower than Tony Blair’s personal approval ratings after the death of Doctor David Kelly, during the time when the Government was deeply embroiled in the affairs of the Iraq War.
At this point in any politician’s career, a problem as big as the one being faced today is probably terminal; those dizzy, halcyon days of the mid noughties where Merkel could be touched by no one are probably gone – and she knows it. So what she must do now is ensure that she is not given any of the blame for anything that may come after as a result of her policies in office. The huge bailout funds have left many Germans feeling almost as if they are giving all their money to other countries that can’t manage their own coffers, and should perhaps simply be left to their fate. However, to save the Euro, this cannot be allowed to happen.
So herein lies the decision: continue on the lines set out by Merkel and Sarkozy; give out blank cheques to insolvent nations in an attempt to keep the Eurozone intact, or decide firmly on a no-way-back scenario; whereby a set of prerequisites are decided, be they financial or otherwise, and when they are fulfilled, the help stops and the insolvent nations of Europe will have to default. If this brings the Eurozone as we know it to an end, then so be it.
Whilst it seems quite evident that it is the first route that will be pursued, it is worth contemplating what might happen if the second were taken. For example, if Greece – and indeed Spain and Portugal – default, a line will be drawn under the massive lending facilitated by the European Central Bank and by Germany and France. Greece will return to the Drachma, Spain to the Peseta and Portugal to the Escudo and, after a few bumps, things will perhaps carry on as they are. Both sides will be content; the more stable Western economies will stop writing cheques for people their populaces increasingly dislike and the Mediterranean and Iberian economies will then sort out their own problems and their people will feel better in the knowledge that jobs and public services are not being cut due to the demands of Brussels. All economies would suffer, but, in the long run, both Western and Mediterranean economies may get on the road to recovery quicker, and could pursue their own policies, whether Socialist or Conservative.
Merkel must be careful not to see only the one route; it could cost her not only her political capital, but also a prosperous future not only for the Eurozone, but for Europe. The last thing anybody wants is a rich-poor dichotomy in Europe, with the failed nations being left in economic downturn as they pay off huge debts whilst the larger, stronger economies of Western Europe find that the money comes pouring in and they slowly recover from recession.
Merkel will most probably lose the next election, or could even bow out before the time comes to contest it. It is doubtful that she will try to hold on any longer than the end of this current Parliament, which will probably signal her retirement from frontline politics. But her ability to make herself a Helmut Kohl, a Margaret Thatcher, even, lies in whether she manages to set the stage for her predecessor; a strong exit policy-wise and results-wise will have her lauded for a long after this is all over. Should the line she takes on the Euro be proved wrong in the long run, and should Europe fall either partly or completely apart, Merkel will belong to that category of men and women who stepped up to the plate when times were tough, and failed to deliver.
Image Credit- Jacques Grießmayer