Merkel is ready for biggest leap of her career

WORLD VIEW:ANGELA MERKEL likes to tell a story of how, aged 12, she spent a 45-minute swimming lesson shivering at the wrong end of the diving board.

Ignoring the cajoling of school mates, she weighed up the pros and cons of jumping and, just before the bell sounded, leaped into the water below.

Four decades on, the euro zone crisis has the German leader on another springboard. Whether it was bailing out Greece or establishing temporary or permanent bailout funds, the German leader has watched and waited before, at the last minute, making a political leap.

Every delayed euro zone decision proves to her critics that the chancellor reacts to events rather than shapes them. This, they say, drives up the final price.

Ask Dr Merkel why she acts as she does, though, and you get a remarkably frank answer.

“I’m the kind of person who waits until a decision is ripe for the making, then decides,” she told journalists recently.

There is a definite sense that pieces of Angela Merkel’s euro zone puzzle are falling into place. Is the lady about to leap?

Since the start of the crisis, a plaintive cry has reverberated around the euro zone: “What does Germany want?”

The answer is simple, for anyone who cares to listen: in exchange for financial assistance to its neighbours, Berlin wants to reattach the political union carriage decoupled from the monetary union locomotive at the 1990 summit in Dublin.

Now Merkel seems to have begun moving towards European finality. On Wednesday, minutes after a green light from Karlsruhe on last year’s bailouts, she gave her most stirring speech this year, calling for greater economic and political union to reverse “decades of false philosophy”.

“The message was that growth was the main thing, regardless of cost and with debt if need be, then pay nothing back in the good times. Decades of debt is what we are dealing with today.”

In the Merkel world view, debt is the weed choking the euro zone. Austerity and reforms are the weedkiller. Economic governance is the best way to keep the garden weed-free.

This absolutist thinking drives many of Germany’s neighbours mad. But not everyone thinks like her. In a riveting series of debates in the Bundestag this week, political leaders proved that, economically, they are a far wider church than they get credit for.

The opposition Social Democrat (SPD) leader Sigmar Gabriel, for instance, tore up Merkel’s austerity prescription.

“We need the famous magic square . . . balancing price stability, economic growth, a high employment rate and foreign trade balance – that is the right answer in Europe,” he said.

Despite his economic disagreement, however, the SPD leader agrees on making German bailout support conditional on greater EU fiscal and budgetary oversight in Europe. If anything, the SPD is critical that Merkel has not gone far enough, fast enough.

“To whom should indebted member states hand over their competences?” asked Gabriel in the Bundestag on Thursday.

“To a common, democratically legitimised EU? Or to anonymous finance markets that, at this stage, bet against anything that promises a quick profit?”

Make no mistake: two weeks after Helmut Kohl complained about Germany’s “directionless” European politics, Berlin’s EU debate has roared back to life.

This week the idea of a two-speed Europe has re-entered the German debate. Finance minister Wolfgang Schäuble, who proposed the idea 15 years ago, favours a euro zone core pursuing tighter economic governance but is coy about a feasible timeframe.

Ex-chancellor Gerhard Schröder is less so: in Der Spiegel he urged Merkel “not to hang around” but to establish a euro zone core to drive closer political and fiscal union, leaving Britain outside the door.

To do that, the EU needs new rules. So, on Wednesday, Merkel told the Bundestag she wanted to make economic reforms obligatory and budgetary oversight binding. Her message: it is time to “drop the taboo” of treaty change.

As she prepares for her political leap, clouds are forming on the horizon. The September 29th vote to expand the European Financial Stability Facility could be tight; the vote to establish the permanent European Stability Mechanism, scheduled for December, even tighter.

With Merkel facing the prospect of a backbench rebellion, Schröder said he sensed a Kanzlerdämmerung– chancellor twilight – in Berlin.

The biggest danger to Merkel’s ambition is the admission this week from a senior finance ministry official that Germany’s economic situation is “getting difficult”. Multibillion euro solidarity in a boom is one thing; committing to bailouts in an economic slowdown is something else. Merkel knows her political leverage for closer EU integration is inextricably linked to the health of the German economy – and the window to act is closing.

As the debate warms up, the same people who wail “what does Germany want?” are likely to pull out their other cliche: claims of a German diktat on Europe.

Rather than complain, it would make more sense to join the discussion. For instance, if Germany wants a parallel euro zone core steering national economic and fiscal policy via intergovernmental agreements, will this come at the expense of the EU Commission, where smaller member states feel more comfortable of being heard?

Make no mistake: the EU is on the springboard and Angela Merkel is gearing up for the biggest leap of her political career.