Merkel must take stock of Greek challenge to German doctrine

In November 2011 an ally of Chancellor Angela Merkel raised hackles for claiming Europe, having swallowed Berlin's crisis remedy, "now speaks German".

Sunday evening’s election victory for Syriza left many Germans wondering: does Europe now speak Greek?

In Berlin, senior government officials practised their poker faces and steadied their nerves in anticipation of a tense stand-off during a new era of relations with Athens.

But Merkel allies warned it was too soon to give the last rights to Germany’s cut-first, invest-later strategy to stabilise the euro area – dismissed elsewhere as little-loved austerity.

Within minutes of polls closing in Athens, Bundesbank bank president Jens Weidmann, economic adviser to Merkel at the peak of the crisis, urged Syriza "not to make promises it can't afford . . . or call into question what has been achieved to date".

Debt relief

The Bundesbank president, a respected spokesman for Germany’s fiscal hawks, pointed out that Athens had already enjoyed two rounds of debt relief and demanded further reform of its civil service, public finances and wider economy.

"What's clear is that Greece is still dependent on aid programmes and such programmes can only exist when agreements are honoured," said Weidmann, in a none-too-subtle warning.

“A [further] debt cut would only give a short pause for breath.”

Given Germany’s stance on austerity is far less homogenous than many outsiders realise, a bruising time lies ahead.

In one corner are hardliners in Merkel's Christian Democrat camp, such as Markus Söder. The Bavarian finance minister warned yesterday concessions for Greece that would "hit the German taxpayer are . . . out of the question".

Breathing down the chancellor’s neck, too, is the hard-right Alternative für Deutschland (AfD), which has pounced on the result as another reason for Athens to leave the euro area.

In recent weeks, Berlin has adopted a good cop/bad cop strategy.

Unnamed sources warned Syriza not to try "blackmailing" the euro zone via Der Spiegel, predicting the bloc would survive the exit of a "weak link" like Greece.

Good cop Merkel, meanwhile, insisted last week she saw Greece’s future inside the currency bloc.

But in Davos she underlined the link between further solidarity for Greece with Athens “continuing to show responsibility for itself”.

Once the megaphone diplomacy has ended, the first clash is likely in Brussels.

Weidmann could have been speaking for his former boss in Berlin when he warned the European Commission via German public television last night "not to loosen further" euro area budgetary rules.

The loudest cheer in Berlin came from the Left Party, Syriza's sister organisation, where leader Bernd Riexinger congratulated Greeks for kicking out "corrupt" parties and raising "hopes of new social justice in politics".

Experienced Berlin watchers suggested that critics of German austerity should not underestimate Merkel’s skill at shifting to fit a new status quo.

"She has no other option to wait it out and make the best of it," said Dr Gero Neugebauer, political scientist at Berlin's Free University.

“If others demand it, she has little option but to renegotiate with Greece.”

Not everyone in Germany would see a shift in policy to Athens as a Greek tragedy. A small but loud group of economists and media commentators have wondered for years why the broad European opposition to Berlin-driven austerity politics never firmed into a united political front.

As the Bundesbank lost its European Central Bank battle against bond-buying last week, Die Zeit weekly predicted that a Syriza win means "Germany risks losing control over the euro rescue politics".

Collision course

Given Germany’s contrary stance in the EU – from ECB policy to austerity – one Berlin television host had a twinkle in his eye when he noted: “When everyone else is driving towards you, it it doesn’t mean they are all going in the wrong direction.”

After five years directing traffic, Greek voters have given Angela Merkel pause to study her road map.

"The worst thing now would be a game of chicken with all sides sticking to their positions," warned economist Prof Peter Bofinger. "But I think people are smart enough on all sides not to destabilise everything again."