Inside Germany’s special relationship with Turkey

Source: The New European
August 27 2020


Germany’s response to the crisis involving fellow EU member Greece and Turkey has put a spotlight on the complex relationship between Berlin and Ankara, says Cathrin Schaer.

The German chancellor has been called a lot of names over the years. Germans often refer to Angela Merkel as ‘Mutti’, or ‘mummy’. The French have been known to call her ‘Angie’. She has also been described as the ‘queen of Europe’, ‘Mrs Nein’, ‘the climate chancellor’ and, more often lately, ‘leader of the free world’.

Soon though, the longstanding German leader may find that another nickname becomes more widely known: ‘the Erdogan whisperer’.

“That is how she is seen here,” says Kristian Brakel, who heads the Istanbul office of the left-leaning Heinrich Böll Foundation. “She is somebody he [Turkish leader, Recep Tayyip Erdogan] has to listen to.”

The fact that Erdogan listens to Merkel is about more than the German’s non-threatening diplomatic style. Turkey’s increasingly authoritarian leader pays attention to Germany’s Mutti because of the country’s special relationship with Turkey.

“There is no other country that Turkey has such a relationship with, and on so many different levels,” continues Brakel, who has been heading his foundation’s office in Istanbul for the past five years and observing Turkish affairs for almost 20.

“For Turkey, what is said in Berlin is more relevant than what is said in Brussels. Although,” he cautions, “that [special relationship] is not always taken quite as seriously in Germany as it is here.”

“Our special relationship with Turkey – unequalled in intensity and duration by any other European country – goes back to the beginning of the modern age,” German foreign policy expert, Constanze Stelzenmüller, wrote in an essay. Germany is Turkey’s most important trading partner, the top destination for Turkish exports and, if not for energy deals with Russia, Germany would be Turkey’s biggest importer too.

Trade between the two countries totalled around 35.4 billion euros in 2019, with the trade balance in Germany’s favour to the tune of almost four billion. Germany is also one of the top investors inside Turkey with companies like BASF, Siemens, Volkswagen and Daimler all setting up shop there.

Germany is also home to an estimated four million locals of Turkish descent, thanks to migration that began in the 1960s; that’s the largest Turkish population outside of Turkey.

More recently Germany has played a major role in Turkey’s international affairs, firstly as a prime mover in stalling its attempt to become an official member of the European Union and then, more recently in the forging of the still-controversial immigration deal which sees Turkey – often described as the bridge between Europe and the Middle East – keeping migrants and asylum seekers at bay, at Europe’s outermost borders.

It’s never been an easy relationship and thanks to Turkey’s increasingly assertive – some call it aggressive, others argue that it is defensive – foreign policy, as well as Erdogan’s progressively more authoritarian behaviour after the 2016 coup attempt, it’s getting trickier all the time.

Part of the former includes the tense situation in the eastern Mediterranean, which saw Greek and Turkish ships collide, in the latest in a long, historical line of Greek-Turkish skirmishes. As international relations expert Michaël Tanchum wrote for Foreign Policy magazine recently about the EU’s reaction to this: “The six Mediterranean EU countries are evenly split. Greece, Cyprus, and France advocate strong action against Turkey while Italy, Malta, and Spain – which all share significant commercial interests with Turkey – have refrained. Germany, holding the EU presidency since July, could break the deadlock,” he suggested.

Yet somehow, that isn’t happening – at least, not yet. And it’s really annoying some of the neighbours. “Frau Merkel is an ally of the sultan!,” was the outraged headline in one nationalist Greek publication, Dimokratia.

It was no coincidence that the Turkish provocations were happening just as Germany took over the European council presidency, the article continued.

“If we really had a special relationship with Germany, then the chancellor should have given us her full support against Turkey’s aggressiveness and Islamist expansionism,” op-ed writer, Jean-Loup Bonnamy, complained in French daily, Le Figaro.

“What has counted the most in the [eastern Mediterranean] crisis is Germany’s exceedingly low profile,” François Heisbourg, senior adviser for Europe at the London-based International Institute for Strategic Studies, tweeted. Writing in the Guardian, foreign affairs commentator Simon Tisdall contrasted the EU’s reactions to elections in Belarus and the Mediterranean maritime fracas: “Unlike Belarus, [Turkey] has real strategic importance,” he wrote. “Perhaps that explains the awkward silence of many governments, including the UK’s. It does not excuse it.”

Then again, Germany probably has better excuses than most. “Germany is in a bind here,” the Heinrich Böll Foundation’s Brakel says. “It has this influence on Turkey but, because of the multi-faceted relationship it has, it is also much more vulnerable than other EU members and has more to lose.”

The vulnerabilities are the same things that have brought the two countries so close: money, migration and strategic military ties.

Over the past two decades, the Turkish economy has boomed. Even so, Turkey still needs Germany, more than Germany needs Turkey.

In 2019, Turkey ranked 17th in Germany’s list of trading partners. However, as Brakel points out, often there is also significant political pressure coming from those major German companies who have based themselves in Turkey, and who German politicians listen to.

Germany also holds an economic ace, in the form of planned negotiations over the customs union, first established in 1995, that Turkey and the EU have agreed to.

This union was to be modernised and could have added billions in EU trade to Turkey’s economy. Talks have stalled due to increased political tensions since the attempted coup in Ankara in 2016.

“For years, Turkey has lusted after an extension of the customs union – and the key to that lies in Berlin,” wrote Die Zeit author, Özlem Topçu. “Nobody wants to simply gift that to the autocratic Erdogan [because it would make him look good].” But maybe it’s a price worth paying, she argued, if he could be persuaded to stick to international maritime law.

Then there’s the Turkish diaspora inside Germany. Like any other residents, Turkish-Germans vote for different parties, which dilutes any obvious electoral impact they might have on the federal government. Many second- or third-generation Turkish-Germans don’t approve of Erdogan’s growing authoritarianism, so wouldn’t necessarily be pushing to defend him. But there’s no doubt that they drive the debate inside the country and, as a result, “there’s not a single politician in Germany who doesn’t have an opinion on Turkey,” Brakel argues.

After concluding the European immigration deal, Turkey has also managed to haunt Germany with the spectre of asylum seekers desperate to reach northern Europe. “Since that deal, Ankara has been in more of a position of strength,” Kadri Tastan, a senior fellow with the German Marshall Fund, or GMF, based in Brussels, explains. “It’s given them huge leverage over the EU and they’ve been using that tool quite effectively.”

“The problems [with migration] are overstated but German politicians still attribute a lot of relevance to the topic,” Brakel concurs. Ongoing media attention on migration and the political upheavals that followed the 2015 acceptance of close to a million asylum seekers – including the rise of the far right in Germany – mean that German politicians are unusually sensitive to those Turkish threats.

Attitudes in the German-Turkish relationship have also been altered by geopolitics in general.

During the Cold War, Turkey felt threatened and saw itself as part of the Western alliance, Brakel explains. But now, the country is acting on the assumption of a multi-polar world order, playing the US off against Russia, and reacting to events depending on what’s best for Turkey, he says: They want to be part of NATO, but NATO shouldn’t rely on them is the message.

“The weakening of US hegemony, the dissolution of clear power relationships within NATO, the economic rise of China and Russia’s military insubordination, as well as the refugee and migration movements from the Middle East, mean that Turkey has more room to
manoeuvre in its foreign policy toward both Germany and the EU,” says Yasar Aydin, a Hamburg-based expert on foreign relations with Turkey. “It allows Ankara to act more offensively toward Berlin.”

Still, if the shooting actually started in the eastern Mediterranean – say, the Turks fire on a Greek or French warship, as reportedly almost happened in June – one would imagine that not even their special relationship would prevent the Germans from taking a harder line.

But nobody in Germany thinks it will come to that. The dissonance between the two countries over issues like human rights, democratic norms and aggressive foreign policy, is peaking. Still, most Germans analysts seem to believe patience, dialogue and diplomacy are required.

Before visiting both Ankara and Athens earlier this week, German foreign minister Heiko Maas stressed the fact that Turkey was of “strategic importance” and wouldn’t be drawn on the possibility of sanctions.

Contrary to what some critics are saying, that’s not German “cowardice”, Alexander Clarkson, a lecturer for German and European Studies at King’s College London, argued on social media. It’s just Germany’s style.

“Emphasis on dialogue slows down German responses,” Clarkson continued, “but is crucial to sustaining consensus for confrontation, if a state that is pushing against the EU system burns down all off-ramps that Berlin offers it.” In an editorial earlier this month, Mark Leonard, director of the think tank, the European Council on Foreign Relations, also advocated for more mediation: “Turkey is not yet a new Russia,” he warned, “but it could become one if the situation is mishandled.”

“We should keep the dialogue going,” Tastan, of the GMF, concludes. “Turkey does have a point but the way in which it is bringing its business into the international arena is a problem. Greece and Cyprus are trying to make this a European problem. EU solidarity is important – but they need to be careful. That’s why it’s up to other EU countries to start a dialogue. That’s why what Germany is doing is a good thing. I hope it works.”

“Getting Turkey to the table won’t be hard,” Brakel theorises. “They know what they want and they know they can only get that through negotiation. They actually want somebody to step in and mediate, to pressure the Greeks into concessions.” And, he says, as uncomfortable as it will be, Germany, with its ‘Erdogan whisperer’, is still the most likely interlocutor.

A lot of the German-Turkish relationship comes down to psychology, the Istanbul-based analyst concludes: “It’s a bit like an old couple, who have been married for a long time,” he says. “They don’t love each other anymore. But getting a divorce would just be way too costly.”

Europe’s Hamiltonian Moment

Source: Project Syndicate

May 21 2020

By Anatole Kaletsky

The proposed sum for the recovery fund proposed by French President Emmanuel Macron and German Chancellor Angela Merkel is small change in an era when politicians and central bankers conjure up trillions almost daily. But, if adopted, the proposal might be remembered as the moment when Europe became a genuine political federation.

LONDON – The new Franco-German proposal for a €500 billion ($547 billion) European recovery fund could turn out to be the most important historic consequence of the coronavirus. It is even conceivable that the deal struck between German Chancellor Angela Merkel and French President Emmanuel Macron might one day be remembered as the European Union’s “Hamiltonian moment,” comparable to the 1790 agreement between Alexander Hamilton and Thomas Jefferson on public borrowing, which helped to turn the United States, a confederation with little central government, into a genuine political federation.

For too long after HIV/AIDS emerged in the 1980s, policymakers and the public simply refused to care, let alone acknowledge the scale of the devastation in their midst. One of the leading scientists from the front lines of the AIDS crisis sees troubling but edifying parallels between that outbreak and the 

Admittedly, this sounds hyperbolic. The proposed sum for the recovery fund is small change in an era when politicians and central bankers conjure up trillions almost daily. And what about the gulf between words and action throughout the EU’s history? Skepticism about the Franco-German proposal is certainly understandable and may prove justified.

The plan amounts to only 3% of the EU’s GDP, compared with the 15% of GDP already committed by Germany to industrial support. Creating any EU recovery plan will require unanimous support from the EU’s 27 member countries – and this will involve unseemly late-night squabbles between the self-styled “Frugal Four” northern governments (the Netherlands, Austria, Finland, and Sweden), which have vehemently opposed funding for Mediterranean EU members which, according to Wopke Hoekstra, the Dutch Finance Minister, have mainly themselves to blame for “failing to reform.”

But to focus on these drawbacks is to miss the potential significance of the plan. What makes the Merkel-Macron deal a potential game changer is not the sum of money or their apparent backing for grants over loans; it is the financial mechanism to which both Merkel and Macron are now publicly committed and must now deliver or suffer enormous loss of face.

The Merkel-Macron proposal involves three crucial innovations, which may sound tediously technical but will vastly increase the flexibility of EU fiscal policy and could ultimately transform European politics in a way that really proves comparable to the Hamilton-Jefferson deal.

The key innovation is financing the recovery fund with bonds issued directly by the EU in its own name and guaranteed by its own revenues, instead of using funds raised by national governments, whether acting together or separately. Merkel presumably insisted on this mechanism to avoid the vexations of jointly guaranteed “Eurobonds,” which German public opinion deems politically toxic and possibly unconstitutional, because German taxes could end up paying for Italian or Spanish debts.

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But by relying on the EU, instead of national governments, to issue bonds, the Merkel-Macron plan implies a second, more controversial, innovation, which is clearly necessary to create a fiscal federation, but which European politicians have always tried to avoid.

To guarantee and service hundreds of billions of euros of new borrowing on its own account, the EU will require more tax revenue than it now receives. Merkel and Macron have therefore proposed increasing the European Commission’s budget from 1.2% to 2% of EU gross national income, yielding about €180 billion per year in extra revenue.

To raise this amount, the EU will need to levy new taxes on its own account, in addition to the customs duties and small share of national VAT revenues which already flow automatically to Brussels. The exact nature of the EU’s new taxes will presumably be the subject of fierce debate and fiercer lobbying.

But a broad consensus seems to be emerging that pan-European taxes should be based on economic activities that transcend national boundaries, such as carbon dioxide emissions, financial transactions, and digital transactions. Some of this extra tax revenue will flow into recovery projects, but most will be needed for other EU spending, such as the “cohesion funds,” which subsidize the poorer eastern countries (and help to buy off governments that might otherwise block the recovery fund and other EU initiatives and reforms) – and also to replace the United Kingdom’s net contributions of roughly €10 billion per year.

That leads to the third game-changing innovation in the Merkel-Macron plan: permitting the EU to leverage its activities with borrowing, instead of just using the EU budget as a pass-through mechanism from pan-European taxes to current spending. Because of today’s near-zero interest rates for triple-A sovereign borrowers, the leverage potentially available to the EU from a modest amount of extra revenue is enormous.

If the EU issued ten-year bonds, it would probably pay interest of zero or below, potentially allowing almost unlimited borrowing, albeit with sinking funds to redeem the debts at maturity. But even a 50-year bond could probably be issued with a coupon no higher than the 0.5% yield on Austria’s 50-year bond.

Better still, the EU could issue perpetual bonds with no redemption date, similar to the now-retired British and US “consols,” as proposed by the Spanish government and George Soros. This would allow the EU to borrow €500 billion at an interest cost of just €2.5 billion per year.

To put it another way, if the EU borrows €500 billion this year for a European recovery fund, then it could easily borrow another €1 trillion next year for a digital inclusion fund, and then maybe €2 trillion for a vehicle electrification fund or €3 trillion for a comprehensive climate-change fund. Such simple calculations show why European economic and political conditions could be completely transformed by the Merkel-Macron plan’s financial innovations.

There are big obstacles in achieving the unanimity the plan requires. The Frugal Four will vehemently object to offering grants, rather than loans, to the bloc’s Mediterranean members. But it is hard to imagine that any of these governments will try to sabotage completely an initiative that equally “frugal” Germans support. Instead, the debate in Europe will probably accept the three technical principles just outlined, but focus instead on two separate controversies: the amount of new EU borrowing and whether EU support should take the form of loans or outright grants.

On these two issues, a compromise acceptable to both sides should not be difficult to forge. The size of the recovery fund could be increased to something near the €1 trillion recommended by the European Commission without imposing any strain on the EU budget. But in exchange, the Frugals could insist on offering 50% of the support through loans instead of grants.

A compromise like this would make the Merkel-Macron plan even stronger. Loans with near-zero interest rates and long maturities are economically almost equivalent to grants. And using loans instead of grants would make EU debt financially more sustainable, thereby maximizing the scope for further borrowing without risking the bloc’s triple-A rating.

The scope for such compromises suggests the EU could readily agree on a powerful recovery plan that preserves all three essential elements of the Merkel-Macron proposal: bonds issued by the EU in its own name; pan-European taxes on cross-border activities; and leverage to benefit from low interest rates. If EU leaders can rise to this challenge, Europe’s “Hamiltonian moment” will finally have arrived.

Franco-German Recovery Fund will not Fix Eurozone

Source: Chatham House

May 21 2020

By Pepijn Bergsen

The proposed fund to aid recovery from the coronavirus is a welcome sign of EU solidarity. But it does not do nearly enough to address the bloc’s underlying weaknesses, and is not a game changer for fiscal integration.

We don’t know yet exactly what Angela Merkel and Emmanuel Macron's proposed temporary fund of €500 billion will be spent on, but it will likely include investment in green infrastructure, research and support for the hardest-hit sectors.

Although the money will flow through the EU budget, it is likely to be spent early in the next budget period from 2021 to 2027. There are different options for dealing with the debt load created by the fund - it could be paid back over a long period, or continuously rolled over. The latter option is preferable given the likely high demand for these safe assets in financial markets.

As described by Merkel, the Franco-German proposal would mean that the debt servicing (the repayment of interest and principal) would be done through funds allocated to the EU through contributions from the member states, based on their share in the regular EU budget.

This would mean Italy would need to contribute around 15 per cent of these new liabilities. As a result, this technically increases the Italian state’s liabilities by around €75 billion, although accounting rules mean this will probably remain off the state’s balance sheet and thus not increase its headline debt to GDP ratio.

For those more in need?

To be net beneficiaries, countries must receive more from the fund than their share of liabilities. Therefore, if the EU spends more than €75 billion of the recovery fund in Italy, the country will be coming out ahead and it would constitute a transfer from those less in need to those more in need.

Given the relative severity of the coronavirus-related disruption, this is likely to be the case. However, given that other large countries, most notably Spain, have also been hit hard, there will be a limit to the upside for Italy. All member states, not just eurozone countries, will need to receive some of this money, with the political bargaining meaning it likely can’t be too far off from their share of the liability.

Assuming that spending from the fund in Italy is just over 50 per cent more than its share of the liabilities, at €115 billion or 6 per cent of Italy’s 2019 GDP it would constitute an increase in spending in Italy of around 2-3 per cent of GDP for the next couple of years. Some of this spending could have happened without the fund. But this would have come with higher debt servicing costs and it is thus safe to call this plan a significant fiscal boost for Italy, and other fiscally weaker economies.

A fiscal boost should not be confused with a revolution. Some have referred to this as a 'Hamiltonian' moment for the eurozone, referring to the American treasury secretary who bartered the compromise that led to the US federal government assuming the debts incurred by the states during the war of independence.

However, the recovery fund would, for now, remain a one-off and European countries will remain liable for their current debt loads, and for the increase in their debt stocks that will result from the coronacrisis anyway. The European Commission forecasts that the Italian debt stock will increase from 135 per cent of GDP last year to 153 per cent at the end of next year.

The size of the fiscal stimulus provided by the fund means it is likely to boost the growth potential for the Italian economy, particularly if accompanied by other reforms, as the plan suggests it should. However, it would require an unrealistically large boost to significantly improve Italian debt dynamics, especially given the disruption from the coronavirus crisis is going to be felt for a long time anyway.

The Italian state will continue to have to aim for large primary surpluses to finance interest expenditures significantly higher than that of its eurozone peers. If you believed that the Italian situation was economically and politically unsustainable over the long term before the crisis, even a larger version of this fund should not change your mind.

The recovery fund could turn out to be a template for future crisis responses and thereby represent a move towards a proper Hamiltonian moment. But as the fund is an EU instrument, instead of a eurozone instrument, this is harder. Furthermore, the next crisis is unlikely to be as symmetrical as the current one, meaning it will be even more difficult to get those member states already opposed to this plan to agree to a repetition or an expansion into something more like a fiscal union.

This does not mean the recovery fund is a bad idea. On the contrary, it should be welcomed as part of the EU’s response to the COVID-19 crisis. Ensuring the southern economies can recover is also in the interest of the fiscally stronger EU member states, who rely on their neighbours to buy many of their exports.

Furthermore, it would be something of a bargain for them, as it should only cost them their share of the interest costs and some of the fund will be spent in their economies. If that is too much to ask in solidarity, the EU has much bigger problems.

Merkel urges Germans not to jeopardize coronavirus achievements

Source: Reuters

May 13 2020

BERLIN (Reuters) - Chancellor Angela Merkel urged Germans on Wednesday not to endanger what they have achieved so far in slowing the spread of the coronavirus by rushing back to normality too fast.

Europe’s biggest economy, battered by a lockdown that started in mid-March, is being closely watched after managing to keep its death rate lower than other countries despite having a high number of cases.

Shops, schools and factories have started up again, and some borders will begin to re-open this week. But the rule of keeping a distance of 1.5 metres from others still stands and masks are required on public transport and in most shops.

Merkel, a trained physicist whose scientific approach to the crisis has been praised, has consistently urged caution in the face of intense pressure from some state premiers and business who have pushed for a faster relaxation.

“Corona remains a danger for everyone of us,” Merkel told the Bundestag lower house of parliament, adding Germans would be living with the pandemic for some time yet as there was still no effective treatment or vaccine.

“It would be depressing if we have to return to restrictions that we want to leave behind us because we want too much too soon,” Merkel said.

Germany’s coronavirus reproduction rate, which Merkel says must remain below a critical threshold of 1 to avoid an overburdening of the health system, fell to an estimated 0.94 on Tuesday from 1.07 on Monday.

Merkel told Germans to return to offices, schools, cafes and sports clubs while keeping a distance and washing their hands. Then it will be possible for the economy to recover, jobs saved and for people to be protected.

One big step along that path is to re-open the borders in Europe, which would help commuters, families and tourism. Earlier, Interior Minister Horst Seehofer outlined a gradual easing of border controls from Saturday.

“The goal is, if the occurrence of infections allows it — I want to say that again — that from June 15, border controls in the Schengen area can be completely eliminated,” Merkel said.

Germany has 171,306 confirmed coronavirus cases, the Robert Koch Institute (RKI) for infectious diseases, said, and 7,634 people have died.

Russian hackers accessed emails from Merkel's constituency office: Der Spiegel

Source: Reuters

May 8 2020

BERLIN (Reuters) - Russia’s GRU military intelligence service appears to have got hold of many emails from Chancellor Angela Merkel’s constituency office in a 2015 hack attack on Germany’s parliament, Der Spiegel magazine reported on Friday, without citing its sources.

A spokesman for the German government had no immediate comment. There was also no immediate comment from Moscow, which has denied previous allegations of hacking abroad.

Der Spiegel said federal criminal police and the federal cyber agency had been able to partially reconstruct the attack and found that two email inboxes from Merkel’s office had been targeted.

They contained email correspondence from 2012 to 2015 and Der Spiegel said the hackers appear to have managed to copy both mailboxes to another computer.

Germany’s Bundestag lower house of parliament discovered its systems had been broken into in May 2015 and concluded that the intrusions had been continuing since at least the beginning of that year. It was impossible to determine what information had been stolen.

The Russian embassy in Berlin was not immediately available for comment.

German federal prosecutors have issued an arrest warrant for an individual linked to the 2015 hacking incident, the Sueddeutsche Zeitung reported this week. Prosecutors have not commented on the report.

Germany's Covid-19 expert: 'For many, I'm the evil guy crippling the economy'

Source: The Guardian

April 26 2020

By Laura Spinney

Germany’s leading coronavirus expert Christian Drosten on Merkel’s leadership, the UK response and the ‘prevention paradox’

Christian Drosten, who directs the Institute of Virology at the Charité Hospital in Berlin, was one of those who identified the Sars virus in 2003. As the head of the German public health institute’s reference lab on coronaviruses, he has become the government’s go-to expert on the related virus causing the current pandemic.

In an exclusive interview, Drosten admits he fears a second deadly wave of the virus. He explains why Angela Merkel has an advantage over other world leaders – and why the “prevention paradox” keeps him awake at night.

Q: Germany will start to lift its lockdown gradually from Monday. What happens next?

A: At the moment, we are seeing half-empty ICUs in Germany. This is because we started diagnostics early and on a broad scale, and we stopped the epidemic – that is, we brought the reproduction number [a key measure of the spread of the virus] below 1. Now, what I call the “prevention paradox” has set in. People are claiming we over-reacted, there is political and economic pressure to return to normal. The federal plan is to lift lockdown slightly, but because the German states, or Länder, set their own rules, I fear we’re going to see a lot of creativity in the interpretation of that plan. I worry that the reproduction number will start to climb again, and we will have a second wave.

Q: If the lockdown were kept in place longer, could the disease be eradicated?

A: There is a group of modellers in Germany who suggest that by prolonging lockdown here for another few weeks, we could really suppress virus circulation to a considerable degree – bringing the reproduction number below 0.2. I tend to support them but I haven’t completely made up my mind. The reproduction number is just an average, an indication. It doesn’t tell you about pockets of high prevalence such as senior citizens’ homes, where it will take longer to eradicate the disease, and from where we could see a rapid resurgence even if lockdown were extended.

Q: If there were such a resurgence, could it be contained?

A: Yes, but it can’t happen based on human contact-tracing alone. We now have evidence that almost half of infection events happen before the person passing on the infection develops symptoms – and people are infectious starting two days prior to that. That means that human contact-tracers working with patients to identify those they’ve been exposed to are in a race against time. They need help to catch all those potentially exposed as quickly as possible – and that will require electronic contact-tracing.

Q: How close we are to achieving herd immunity?

A: To achieve herd immunity we need 60-70% of the population to carry antibodies to the virus. The results of antibody tests suggest that in Europe and the US, in general, we are in the low single digits, but the tests are not reliable – all of them have problems with false positives – and herd immunity is also not the whole story. It assumes complete mixing of the population, but there are reasons – in part to do with the social networks people form – why the whole population may not be available for infection at any given time. Networks shift, and new people are exposed to the virus. Such effects can drive waves of infection. Another factor that could impact herd immunity is whether other coronaviruses – those that cause the common cold, for example – offer protection to this one. We don’t know, but it’s possible.

Q: Should all countries be testing everybody?

A: I’m not sure. Even in Germany, with our huge testing capacity, and most of it directed to people reporting symptoms, we have not had a positivity rate above 8%. So I think targeted testing might be best, for people who are really vulnerable – staff in hospitals and care homes, for example. This is not fully in place even in Germany, though we’re moving towards it. The other target should be patients in the first week of symptoms, especially elderly patients who tend to come to hospital too late at the moment – when their lips are already blue and they need intubation. And we need some kind of sentinel surveillance system, to sample the population regularly and follow the development of the reproduction number.

Q: What is known about the seasonality of the virus?

A: Not a lot. The Harvard modelling group led by Marc Lipsitch has suggested that transmission might slow over the summer, but that it will be a small effect. I don’t have better data.

Q: Can we say for sure that the pandemic started in China?

I think so. On the other hand, I don’t assume that it started at the food market in Wuhan. It is more likely to have started where the animal – the intermediate host – was bred.

Q: What do we know about that intermediate host – is it the “poor pangolin”, as it’s come to be known?

A: I don’t see any reason to assume that the virus passed through pangolins on its way to humans. There is an interesting piece of information from the old Sars literature. That virus was found in civet cats, but also in raccoon dogs – something the media overlooked. Raccoon dogs are a massive industry in China, where they are bred on farms and caught in the wild for their fur. If somebody gave me a few hundred thousand bucks and free access to China to find the source of the virus, I would look in places where raccoon dogs are bred.

Q: Will it be useful to identify patient zero – the first human to have been infected with this virus?

A: No. Patient zero is almost certain to have acquired a virus that is very similar to some of the first sequenced viruses, so it wouldn’t help us solve our current problem. I don’t think you could even argue that it would help us prevent future coronavirus pandemics, because humanity will be immune to the next Sars-related coronavirus, having been exposed to this one. Other coronaviruses could pose a threat – a prime candidate is the Middle East respiratory syndrome (Mers) virus – but to understand that threat we have to study how Mers viruses are evolving in camels in the Middle East.

Q: Are human activities responsible for the spillover of coronaviruses from animals into people?

Coronaviruses are prone to switch hosts when there is opportunity, and we create such opportunities through our non-natural use of animals – livestock. Livestock animals are exposed to wildlife, they are kept in large groups that can amplify the virus, and humans have intense contact with them – for example through the consumption of meat – so they certainly represent a possible trajectory of emergence for coronaviruses. Camels count as livestock in the Middle East, and they are the host of the Mers virus as well as human coronavirus 229E – which is one cause of the common cold – while cattle were the original hosts for coronavirus OC43, which is another.

Q: Flu has always been thought to pose the greatest pandemic risk. Is that still the case?
A: Certainly, but we can’t rule out another coronavirus pandemic. After the first Ebola outbreak, in 1976, people thought it would never come back again, but it took less than 20 years to do so.

Q: Is all the science being done around this coronavirus good science?
A: No! Early on, in February, there were many interesting preprints [scientific papers that have not yet been peer-reviewed] around. Now you can read through 50 before you find something that’s actually solid and interesting. A lot of research resources are being wasted.

Q: Angela Merkel has been praised for her leadership during this crisis. What makes her a good leader?

She’s extremely well-informed. It helps that she’s a scientist and can handle numbers. But I think it mainly comes down to her character – her thoughtfulness and ability to reassure. Maybe one of the distinguishing features of a good leader is that they are not using this present situation as a political opportunity. They know how counterproductive that would be.

Q: From where you stand, how is the UK handling the situation?

A: It’s clear that testing was implemented a little bit too late in the UK. Public Health England was in a position to diagnose the disease very early on – we worked with them to make the diagnostic test – but rollout in Germany was driven in part by market forces, which made it fast, and that wasn’t the case in the UK. Now, though, I have the impression that the UK is really gaining momentum in this regard, and that it is coordinating testing efforts better than Germany.

Q: What keeps you awake at night?

A: In Germany, people see that the hospitals are not overwhelmed, and they don’t understand why their shops have to shut. They only look at what’s happening here, not at the situation in, say, New York or Spain. This is the prevention paradox, and for many Germans I’m the evil guy who is crippling the economy. I get death threats, which I pass on to the police. More worrying to me are the other emails, the ones from people who say they have three kids and they’re worried about the future. It’s not my fault, but those ones keep me awake at night.

Merkel faces growing criticism over German virus strategy

Source: AFP

April 27 2020

Berlin (AFP) - German Chancellor Angela Merkel has been praised at home and abroad for her reaction to the coronavirus crisis, but as voices of discontent grow louder, support for the government's strategy could be on the wane.

Though Germany began to lift lockdown measures last week, Merkel has urged caution and slammed growing impatience to shake off the curbs on public life introduced a month ago to slow contagion.

The measures have proved successful so far, with Germany maintaining a mortality rate of just 3.7 percent in the pandemic, far lower than major European neighbours.

The restrictions have also met with public approval. Almost three quarters of the population said they supported them in a Kantar poll published Friday.

In full-blown crisis just a few months ago, Merkel's CDU/CSU conservative alliance has meanwhile rebounded in the polls, jumping ten points in the last two weeks to 38 percent.

- 'Life and death' -

Yet the mood could be about to change.

Wolfgang Schaeuble, an elder statesman of German politics and current president of the Bundestag lower house, warned that extended restrictions would impinge on fundamental citizens' rights.

"When I hear that protecting lives should come above everything else, I don't think that is absolutely true," he told Berlin daily Der Tagesspiegel on Sunday.

Merkel also provoked the ire of regional leaders when she suggested last week that they had been too eager to relax restrictions.

Armin Laschet, state premier for Germany's most populous region North-Rhine Westphalia and a candidate to succeed Merkel as CDU leader, protested that the discussion over how to lift lockdown measures was "appropriate".

"It is of course still a question of life and death," he told public broadcaster ARD on Sunday night.

Yet he insisted that the negative effects of lockdown must also be "weighed up", pointing in particular to children "who have had to stay at home for the last six weeks".

He also attacked what he saw as the pessimistic predictions of some medical experts, pointing out that "40 percent of intensive care beds are empty" in his state.

Germany's most popular newspaper Bild echoed Laschet's words in a scathing editorial on Monday, accusing Merkel of being "stubborn, pig-headed and bossy".

- 'End of national unity' -

Largely muted in the crisis until now, Germany's opposition parties are also beginning to grow more critical of the government's course.

The Greens, still the highest polling opposition party despite a recent slump, have urged more caution. On Sunday, co-leader Annalena Baerbock slammed plans to allow Bundesliga football to resume without spectators from next month.

The leader of the liberal FDP Christian Lindner warned that consensus over coronavirus measures was breaking down, declaring the "end of national unity".

His party's concern over both the fate of small and medium-sized businesses, as well as the erosion of civil liberties, is also shared by more extreme groups.

Far left and far right protesters have assembled in Berlin every Saturday in recent weeks, calling for "democratic resistance" against what they claim are authoritarian and unconstitutional coronavirus restrictions.

Police arrested around 100 of an estimated 1,000 protesters last Saturday and a further demonstration is planned for May 1.

The far-right AfD, Germany's largest opposition party by number of MPs, has also declared its opposition to lockdown.

"The absolute shutdown was avoidable and (the government) is now missing a chance to end it," claimed AfD lawmaker Sebastian Muenzenmaier, adding that "all shops must be opened: give the people back their liberty!".

Weekly newspaper Die Zeit warned the AfD could "profit from the long term consequences" of the virus such as mass unemployment.

EU Leaders Struggle to Find Way Forward With Economy Tanking

Source: Bloomberg

March 27 2020

By Viktoria Dendrinou and Nikos Chrysoloras

European leaders struggled to agree on a concrete strategy to contain the fallout from the deadly coronavirus, leaving key details to be hammered out in the weeks ahead.

With thousands of people falling ill and hundreds dying every day from the pandemic, the leaders spent much of Thursday arguing over whether a joint communique would hint at financial burden sharing as a way to repair the damage to their economies. Earlier this week, finance ministers had passed the buck to the leaders but the leaders passed it right back. They tasked the finance chiefs with coming up with proposals within two weeks.

A video call was expected to give the green light for the creation of credit lines from the region’s bailout fund to keep borrowing costs low while governments ramp up spending to cushion the impact of the pandemic. But efforts to agree on the exact wording of the common statement ended with a fudge after six hours of talks, as a group of member states including France, Italy and Spain pushed for more radical steps to tackle the economic impact, such as the prospect of joint debt issuance via so-called coronabonds.

That call was backed by European Central Bank President Christine Lagarde who warned leaders they were facing a crisis of “epic” proportions. But her appeals fell largely on deaf ears with Germany and the Netherlands, echoing similar divisions during the sovereign debt crisis that almost tore the bloc apart almost decade ago. The European Stability Mechanism was seen by many countries as a more straightforward solution to the problem of funding the response but Italy pushed back.

While German Chancellor Angela Merkel agreed with the bleak assessment of the situation, she resisted calls for mutualizing debt, warning against unrealistic expectations, according to the officials. Merkel’s tone was more categorical than before, one of the officials said, after nine EU leaders, including France’s Emmanuel Macron, backed the idea of coronabonds in a letter ahead of the meeting. Dutch Prime Minister Mark Rutte backed the German chancellor’s stance on the joint instruments, the officials said.

Merkel’s intervention, delivered via an interpreter with just her photo on screen, came amid dramatic pleas for more action from her counterparts. In an address officials described as emotional, Italian Prime Minister Giuseppe Conte said his whole country was suffering, while Macron warned that the political reaction after this crisis could kill the European project, two of the officials said. Spanish Prime Minister Pedro Sanchez joined Conte in pushing for bolder and faster fiscal action and fought to stop the baton passing back to finance ministers.

Over a heated exchange, countries most hit by the coronavirus were pitted against those from Europe’s fiscally hawkish north. In lieu of concrete decisions and in an effort to bridge the different positions, the leaders asked the presidents of the European Union institutions to come up a with a proposal for an exit strategy, on top of the work assigned to finance minister over the next two weeks.

While some officials interpreted the vagueness in the statement as a win for countries who pushed for steps that went beyond the mobilization of the ESM, there was little evidence that opponents to coronabonds were ready to give ground.

Speaking after the leaders’ call, Merkel said “Germany and others” were not in agreement on joint debt. “For me, the ESM is the preferred instrument -- it was created for times of crisis,” she said.

ECB Weapon

The ECB’s massive intervention earlier this month has let the decision-making paralysis among EU governments go unpunished. When sovereign bond yields spiked amid doubts by investors on whether indebted countries can afford the spending required to stem the fallout, the ECB announced a bond purchase program that brought down borrowing costs across the bloc.

But some leaders cautioned that not acting convincingly on the fiscal front could eventually undermine the ECB’s work. During the leaders’ discussion Greek Prime Minister Kyriakos Mitsotakis, who co-signed the letter calling for coronabonds, cautioned that if the bloc didn’t react, it could push the ECB toward an even larger program that would risk financial instability.

What does Germany’s SPD fear most? AfD or a collapse in the polls?

https://unherd.com/the-feed-blog/germanys-spd-fear-afd-collapse-polls/

To escape from economic hell, Greece needs Tsipras to call Germany’s bluff

 As the situation stands, Greece faces a vain struggle to escape an economic Hades. Illustration: David Simonds for the Observer

Πηγή: The Guardian
Feb 1 2015

If Athens stands firm and threatens to depart and default, Angela Merkel and the euro hardliners will almost certainly have to give ground.

Lovers of Greek myths know the story of Sisyphus, the king of Corinth who as a punishment from the gods was condemned to spend his time in Hades pushing a boulder to the top of a hill. Every time Sisyphus neared the summit, the boulder slipped from his hands and rolled to the bottom of the slope, and he had to start all over again.

The parallels between the sad story of Sisyphus and the equally sad story of Greece are too obvious to require comment. Burdened with debts that are worth 175% of its national output and rising, Greece faces a vain struggle to escape from the economic Hades in which it has been struggling these past five years.

So when Alexis Tsipras, head of Greece’s new Syriza coalition government, says his country not only needs debt relief but demands it, he is right. Under the austerity conditions of the past half-decade, the Greek economy has shrunk by 25%. Living standards were 85% of the European average before the financial crisis; they are now down to 60%. The surprising thing about Greece is not that the people have voted for a radical alternative to the status quo, but that they were stoical for so long.

Tsipras’s challenge to the economic orthodoxy also makes sense. What Greece – and the indeed the entire eurozone – needs is not more austerity but stronger demand. Two numbers illustrate the abject failure of economic policy in the 19-nation single currency area: -0.6% and 11.4%. The first is the current inflation rate; the second the current jobless rate.

The new government in Athens has made its intentions clear. It has shelved privatisation plans. It has raised the minimum wage and announced moves to hire more civil servants. The message from Tsipras is that we want debt relief and an end to the economic squeeze, and we want them now.

There is, though, a complication. Greek voters also want to stay in the eurozone and the European Union, which means that Tsipras can get what he wants only through negotiations with his country’s creditors. That means doing a deal with the European Central Bank, the other members of the EU and the International Monetary Fund. Ultimately, it means doing a deal with Angela Merkel.

David Marsh of the Official Monetary and Financial Institutions Forum wonders how Syriza is going to reconcile these three aims. Merkel and the other EU hardliners can see the inconsistency in Tsipras’s negotiating position. They are relatively relaxed about Greece because they know the tough talking has yet to start. Then they will say that if Greece wants to stay in the euro and wants ECB support for its shaky banks, it has to accept the terms set by its creditors, perhaps with some minor modifications.

Tsipras’s best chance of avoiding a humiliating climbdown is to toughen his stance and threaten to leave the euro unless he gets Greece’s official debt reduced by, say, 50%. Indeed, unless he is prepared to do this, it’s hard to see why this leftwing prime minister chose a rightwing anti-German party as his coalition partner.

The negotiating line should be as follows. Greece should never have been allowed to join the euro. The rest of the eurozone was complicit in this disastrous decision. The rest of the eurozone, including Germany, allowed Greece to live beyond its means. Life outside the euro would not be a bed of roses but would allow Greece to devalue and default. There would be big contagion risks. Does an already enfeebled eurozone really want that? If not, provide some serious relief.

To which Merkel and co might reply: leave then. But they almost certainly would not say that. For Tsipras, hanging tough is a risk worth taking.

Now there’s a north-south divide over Morrisons

Who needs Morrisons? Not the UK, according to Bruno Monteyne, highly regarded supermarket analyst at Bernstein. “I struggle to see how the Morrisonsoffer is a value offer that is sufficiently different from Asda and hard discounters to warrant its proper space in the UK retail landscape,” he wrote in a blistering research note last week.

One can understand the argument, of course. Aldi and Lidl have parked themselves on the patch that Morrisons used to occupy, which Monteyne characterises as “amazingly good quality of fresh food for the price you pay”. Despite attempting to get back to its roots for the past year, Morrisons’ sales are still falling. The group has a cost-cutting plan but it is more ambitious than any attempted in the industry. And shareholders know what a new chairman (Andrew Higginson) and a new chief executive (to be recruited) usually bring in these circumstances: a cut in the dividend and a warning that profit margins will have to fall even further.

But this diagnosis sounds far too gloomy. Morrisons, under departing boss Dalton Philips, made many mistakes, like initially trying to take the firm upmarket and then squandering time and energy on a kids’ clothing chain. But the business is not suffering a fatal illness.

Morrisons has the great benefit that its stores tend to be smaller than those of its rivals. This was a disadvantage five years ago, but now is definitely a plus – hypermarkets are history. Nor is the Morrisons brand broken – certainly not in its northern heartland. If Morrisons can more or less match Aldi and Lidl on prices on key items, the strength of the brand ought to tell over time. The turnaround was always meant to be a three-year affair.

Higginson, and whichever chief executive he chooses, face a stiff challenge, no question. Another profits warning is plainly possible. But borrowings are low and the business generates cash. That’s a decent base from which to attempt to run things better. The idea that the UK doesn’t need Morrisons looks to be a view from the south. It’s not what shoppers say in the north.

Little joy for Big Oil

The collapse in oil prices over the past six months will show up most acutely in corporate profits on Tuesday, when BP is expected to report a 40% slump in final-quarter earnings. And BP should have been in a better position than this, because it had been forced to radically prune its business to pay for the multibillion-dollar costs of Deepwater Horizon.

Shell announced last week that it, too, is pruning costs, while Chevron of the US has already reported a 28% profit fall.

A long period of low oil prices, with no uplift in sight, leaves Big Oil under the cosh as it tries to cut spending – while maintaining drilling rates so as to keep wells open and fund dividends. And all at a time when worries over global warming are challenging the industry’s legitimacy as never before. Oil executives will have to work for their bonuses this year.

Go ahead, Angela, make my day

'Πηγή:  The Economist
Jan 31 2015

IT WAS in Greece that the infernal euro crisis began just over five years ago. So it is classically fitting that Greece should now be where the denouement may be played out—thanks to the big election win on January 25th for the far-left populist Syriza party led by Alexis Tsipras (see article). By demanding a big cut in Greece’s debt and promising a public-spending spree, Mr Tsipras has thrown down the greatest challenge so far to Europe’s single currency—and thus to Angela Merkel, Germany’s chancellor, who has set the austere path for the continent.

The stakes are high. Although everybody, including Mr Tsipras, insists they want Greece to stay in the euro, there is now a clear threat of Grexit. In 2011-12 Mrs Merkel wavered, but then decided to support the Greeks to keep them in the single currency. She did not want Germany to be blamed for another European disaster, and both northern creditors and southern debtors were nervous about the consequences of a chaotic Greek exit for Europe’s banks and their economies.

This time the odds have changed. Grexit would look more like the Greeks’ fault, Europe’s economy is stronger and 80% of Greece’s debt is in the hands of other governments or official bodies. Above all the politics are different. The Finns and the Dutch, like the Germans, want Greece to stick to promises it made when they twice bailed it out. And in southern Europe centrist governments fear that a successful Greek blackmail would push voters towards their own populist opposition parties, like Spain’s Podemos (see article).

A good answer to a bad question

It could all get very messy. But there are broadly three possible outcomes: the good, the disastrous, and a compromise to kick the can down the road. The history of the euro has always been to defer the pain, but now the battle is about politics not economics—and compromise may be much harder.

Tantalisingly, there is a good solution to be grabbed for both Greece and Europe. Mr Tsipras has got two big things right, and one completely wrong. He is right that Europe’s austerity has been excessive. Mrs Merkel’s policies have been throttling the continent’s economy and have ushered in deflation. The belated launch of quantitative easing (QE) by the European Central Bank admits as much. Mr Tsipras is also right that Greece’s debt, which has risen from 109% to a colossal 175% of GDP over the past six years despite tax rises and spending cuts, is unpayable. Greece should be put into a forgiveness programme just like a bankrupt African country. But Mr Tsipras is wrong to abandon reform at home. His plans to rehire 12,000 public-sector workers, abandon privatisation and introduce a big rise in the minimum wage would all undo Greece’s hard-won gains in competitiveness.

Hence this newspaper’s solution: get Mr Tsipras to junk his crazy socialism and to stick to structural reforms in exchange for debt forgiveness—either by pushing the maturity of Greek debt out even further or, better still, by reducing its face value. Mr Tspiras could vent his leftist urges by breaking up Greece’s cosy protected oligopolies and tackling corruption. The combination of macroeconomic easing with microeconomic structural reform might even provide a model for other countries, like Italy and even France.

A very logical dream—until you wake up and remember that Mr Tsipras probably is a crazy leftwinger and Mrs Merkel can barely accept the existing plans for QE. Hence the second, disastrous outcome: Grexit. Optimists are right that it would now be less painful than in 2012, but it would still hurt.

In Greece it would lead to bust banks, onerous capital controls, more loss of income, unemployment even higher than today’s 25% rate—and the country’s likely exit from the European Union. The knock-on effects of Grexit on the rest of Europe would also be tough. It would immediately trigger doubts over whether Portugal, Spain and even Italy should or could stay in the euro. The euro’s new protections, the banking union and a bail-out fund, are, to put it mildly, untested.

So the most likely answer is a temporary fudge—but it is one that is unlikely to last long. If Mr Tsipras gets no debt relief, then he will lose all credibility with Greek voters. But even if he wins only marginal improvements in Greece’s position, other countries are bound to resist. Any changes in the bail-out terms will have to be voted on in some national parliaments, including Finland’s. If they passed, voters in countries like Spain and Portugal would demand an end to their own austerity. Worse still, populists from the right and left in France and Italy, who are not just against austerity but against their countries’ membership of the euro, would be strengthened.

And there are technical problems with any fudge. The ECB is adamant that it cannot provide emergency liquidity to Greece’s banks or buy up its bonds unless Mr Tsipras’s government is in an agreed programme with creditors, so any impasse is likely to trigger a run on Greek banks. By stretching out maturities, some of this could be avoided—but that may be too little for Mr Tsipras and too much for Mrs Merkel.

Hello to Berlin

So in the end, Greece will probably force Europe to make some hard choices. With luck it will be towards the good outcome outlined above. Greek voters may be living in a fool’s paradise if they think Mr Tsipras can deliver what he says, but the Germans too have to look at the consequences of their obstinacy. Five years after the onset of the euro crisis, southern euro-zone countries remain stuck with near-zero growth and blisteringly high unemployment. Deflation is setting in, so debt burdens rise despite fiscal austerity. When policies are delivering such bad outcomes, a revolt by Greek voters was both predictable and understandable.

If Mrs Merkel continues to oppose all efforts to kick-start growth and banish deflation in the euro zone, she will condemn Europe to a lost decade even more debilitating than Japan’s in the 1990s. That would surely trigger a bigger populist backlash than Greece’s, right across Europe. It is hard to see how the single currency could survive in such circumstances. And the biggest loser if it did not would be Germany itself.

Isolated in Brussels: Merkel Clashes with EU Commission

Angela Merkel at the recent EU summit on Dec. 19 in Brussels: The chancellor has become bogged down in her attempt to lead the Europe.

Πηγή: Speigel
By SPIEGEL Staff
Jan 2 2014

Even as the euro crisis grows less acute, Europe is stuck. The European Commission is resisting any loss of its power, and many member states are tired of German dominance. Opponents of Europe, including those in Merkel's camp, sense an opportunity.

On page 157 of the coalition agreement between Germany's center-right Christian Democratic Union (CDU) and the center-left Social Democratic Party (SPD), at the beginning of the section on Europe, there is an oldie that many German governments have crooned in the past. It has to do with the German language -- that is, its use in the European institutions. "German must be put on equal terms, in practice, with the other two procedural languages, English and French," the document reads.

It's a pious hope that will likely remain one, just as it was in the days of former German Chancellors Helmut Kohl and Gerhard Schröder. They too wanted to hear more German spoken in the everyday deliberations of the European Commission and the European Parliament. Of course, there has been no change to the dominance of English and French to this day.

There is no evidence that the current chancellor, Angela Merkel, has ever paid more than lip service to the decades-old language dispute. She couldn't care less whether negotiations and meetings are conducted in English or French. To Merkel, it's more important that her Europe of the future becomes significantly more German. She wants Europe to become a different place, and certainly not the Europe Helmut Kohl envisioned. Merkel's Europe is no longer dominated by the European Commission, but instead is a place where the nation states become increasingly important. This would signify a departure from the history of European development over the course of more than six decades, as well as being a part of Germany's national interest.

That would spell the end for the so-called "Monnet Method," named after the Frenchman Jean Monnet, a bold postwar visionary who, above all, was a gifted tactician. His name stands for the leitmotif of European unification, which he devised: That powers are "communitized" whenever politically feasible, and wherever it is objectively appropriate. This meant that the European Commission in Brussels, the "custodian of the treaties," would gradually become more powerful.

In practice, since the 1950s this has meant: first coal and steel, then agriculture, the large internal market for goods and services, the euro, powers in domestic and judicial policy, social issues, foreign affairs and preferably a common military. Following every amendment to a treaty, and following almost every landmark decision by the European Court of Justice, the EU's highest court, the European Commission and the European Parliament ended up with more powers than before, while the member states' powers declined.

Resistance to Merkel Grows

Anyone who wishes to depart from this principle is likely to encounter resistance, which means that Merkel needs allies. But the record doesn't look good for the German chancellor at the moment, as she faces growing resistance and is losing allies.

The Germans haven't been on such bad terms with the European Commission in a long time. Brussels is using what is probably its strongest weapon, competition law, to threaten Merkel's most important domestic project at the moment, the federal government's shift away from nuclear power and toward green energy, also known as theEnergiewende. Conversely, Merkel is hardly making a secret of her view that the European Commission should not be closely involved with the next major steps toward a closer economic and monetary union. In her view, the member states should remain in control when it comes to the further restructuring of Europe -- a challenge to the power-conscious eurocrats and their communitized powers. Commission President Olli Rehn has commented critically, that the community method is needed to fully integrate the small member states into decisions.

Berlin has no trouble accepting this conflict as a fact of life, and the chancellor and her advisers are willing to take their chances. But the Germans are now largely on their own among member states. Both small and large EU countries blocked Merkel's latest push for a reform-oriented, common economic and fiscal policy, using Germany as a model. At the EU summit in the second half of December, Merkel was confronted with harsh words from several European leaders, and the mood at the table turned against her. After the meeting, German EU Commissioner Günther Oettinger had this warning for the Chancellery: "Although Germany is the largest member state, it's still only one of 28. Following the Lisbon Treaty, majority decisions in the EU have increased. This is why Berlin must show a willingness to compromise, just like everyone else."

Brussels is at an impasse. For the moment, the chancellor has become bogged down in her attempt to lead the EU.

Commission President José Manuel Barroso was one of the first targets of her anger. At the EU summit, Merkel took the Portuguese politician aside and flatly told him that the proceedings by the Commission against Germany's renewable law -- the German Energies Act (EEG) -- on the grounds it breaches EU competition regulations was an "affront." She told Barroso that Berlin was certainly willing to discuss the exceptions for energy-intensive businesses, which had been significantly expanded recently. But a general attack on the centerpiece of the GermanEnergiewende policy was presumptuous, Merkel said. Since 2002, the European Commission had never raised any fundamental objections to renewable energy, she added, so why now?

Commission Pushes Forward

But the Commission plans to stick to its guns, and the proceeding is continuing as planned. And the EU's executive has even more up its sleeve that will further fuel the conflict. For instance, in Germany energy-intensive companies are not only largely exempt from the EEG reallocation charge, but also from fees for the use of power lines. A decision as to whether this is compatible with competition law will likely be made in the first half of 2014. For some time, Brussels has also been looking into government subsidies for many German regional airports, from Frankfurt-Hahn to Zweibrücken and Kassel-Calden. Brussels also holds a critical view of Deutsche Bahn's monopoly in the rail network, while the European Commission finds fault with the prices that private railroad operators must pay to use the routes.

And the scrutiny of large German export surpluses has only just begun. And although the Chancellery concedes that this scrutiny is formally justified, Berlin is furious nonetheless. It argues that the Commission has granted France and other countries longer grace periods than originally planned to bring their budget deficits below the admissible limit.

Some partners feel a certain sense of schadenfreude to see the Germans coming under fire, as became apparent during a recent dinner hosted by the Italian ambassador to the EU. For almost two hours, the discussion also revolved around German trade surpluses. To the great amusement of everyone present, one of the guests suggested that the surpluses could be offset by German penalty payments for the EEG.

The German representatives in Brussels are doing their utmost to defend themselves in the proceeding, but Commission President Barroso has nothing left to lose, with his term ending in the summer of 2014. And his relationship with Merkel is unlikely to improve anymore at this point, despite the critical role she played in providing him with two terms at the head of the Brussels Commission. It isn't something she wants to be reminded of today.

Critics of the Commission at the Chancellery have since prevailed, most notably the department head for Europe, Nikolaus Meyer-Landrut. From Berlin's perspective, the European Commission wants too much and is not capable enough. Berlin sees Barroso as being out of his depth and the group of commissioners as uncontrollable.

For officials in Berlin, the example of "olive oil jugs" is a case in point. In May, a spokesman for the European Commission announced that the small, open containers on millions of restaurant tables in Europe were to be completely banned. In the future, olive oil was to be served in a "special closed container that cannot be refilled." The Brussels agency argued that its aim is to improve hygiene and consumer protection, and that the new rule would prevent customers from being served bad olive oil. But the presumably well-intentioned provision was not well received. Alarmed by the public outcry, the Commission backtracked, and there was suddenly talk of a solo effort by Agriculture Commissioner Dacian Ciolos.

Part 2: An Unruly Commission

The sheer size of the European Commission is indeed a problem. But because each country ultimately wants to keep its own commissioner, in May the heads of state and government, including Merkel, rejected a plan to reduce the number of commissioners, which was in fact stipulated by treaty. As a result, the center of power in Brussels, with a total of 28 commissioners, will remain almost twice as large as the German cabinet. This leads to bizarrely structured areas of responsibility. For instance, Commissioner Androulla Vassilious, who is from Cyprus, is in charge of culture, even though the European Commission, under the Lisbon Treaty, has no right to intervene in this area. Maltese native Tonio Borg is also in charge of something that the EU has no authority to regulate: health policy. Four other commissioners share foreign policy responsibilities: Foreign Affairs and Security Policy (Catherine Ashton, Great Britain), EU Enlargement and Neighborhood Policy (Stefan Füle, Czech Republic), Humanitarian Aid (Kristalina Georgieva, Bulgaria) and Development Policy (Andris Piebalgs, Latvia).

Berlin officials feel that the Commission is not taken seriously where it should be. Only 10 percent of the Commission's recommendations to EU member states on issues of economic policy were actually implemented in 2012. The Commission skeptics at the Chancellery suspect that there is something very fundamental behind this. They note that in the wake of the acute euro crisis, major reform decisions are now on the agenda, which will no longer be assigned to Brussels officials, because only national governments can justify them to their parliaments and citizens. "Only nation states can justify the reforms that are now truly necessary," says one of Merkel's key advisers. A pension reform in one country and a relaxation of protections against employee dismissal in another are not the kinds of issues that can be entrusted to the "communitized competency" of the European Commission, say German officials. Decisions with such explosive domestic force for national governments can only be made by the governments themselves -- within the European Counil, the powerful body comprised of the leaders of the 28 EU member states.

In this context, Merkel recently came out as either a winner or a loser. But in most cases she was largely alone.

The Germans prevailed with her ideas for a banking union, against the conceivably broad resistance of the remaining 17 euro countries. For months, German Finance Minister Wolfgang Schäuble (CDU) had been reluctant to grant the European Commission the last word in the liquidation of ailing banks, and he prevailed in the end. In the future, representatives of national liquidation agencies will decide which lenders are to be shut down, if necessary. Although the European Commission can oppose the vote, the finance ministers of the member states, that is, Schäuble and his counterparts, can remove the Commissioners' objection.

The decision on the banking union paves the way for more extensive and deeper integration. But in a departure from the policies of the past, the step chiefly strengthens the rights and powers of the member states, not the Commission. The move had Germany's handwriting all over it, but it also led to new tensions. When the finance ministers were about to toast the agreement with sparkling wine, a Southern European diplomat reportedly turned away, according to the Süddeutsche Zeitungnewspaper. Everything tasted German on that evening, the diplomat apparently said, and "I don't drink German sparkling wine."

An Unresolved Euro Crisis Dispute

This resentment stems from the unresolved dispute over the right approach in the euro crisis and the lessons to be drawn from it. In 2010, to be able to monitor debtor nations more closely, Merkel almost singlehandedly ensured that the IMF would assume part of the control over bailout programs, and not the European Commission alone. Since then, Germany, using its domestic "Agenda 2010" -- a package of reforms undertaken by former Chancellor Gerhard Schröder to reduce long-term unemployment benefits and otherwise streamline the social security system -- as a model, has pressured the southern countries to implement reforms and austerity programs. They, in turn, want Berlin to promote German domestic consumption more heavily, invest more and export fewer goods to other euro countries.

No one can force Germany, the perceived class geek, to do so. But at the most recent summit, the other EU leaders at least had the strength to put a stop to Merkel. She had emphatically proposed a common, coordinated economic policy in which the euro countries would commit themselves to structural reforms in individually tailored agreements. "If we do not embark on further reforms, we will eventually run into trouble again," Merkel warned at a dinner of the heads of state and government. But not even traditionally pro-German countries like Austria, the Netherlands and Finland agreed with her proposal, let alone the Southern Europeans.

"I don't need these reform agreements," Spanish Prime Minister Mariano Rajoy snapped. "I don't need anyone else to tell me about reforms, because I've already done that." Merkel's concept was "simply half-baked," Austrian Chancellor Werner Faymann said critically. Merkel continued to pursue the idea and bluntly warned that if individual countries ran into trouble again soon, they could not expect to see any German money. "Don't think that the Bundestag will rush to their assistance again." But her arguments fell on deaf ears. Her idea was postponed, in a serious setback for Merkel.

At the beginning of 2014, Merkel's new, German Europe is still up in the air, facing resistance from the Commission and with hardly any support from other member states. And her next move is to mobilize the Christian Social Union (CSU), the CDU's Bavarian sister party, to take a more general anti-European approach.

The CSU is planning a European election campaign that is decidedly anti-Brussels, as indicated by a four-page strategy document drafted by the CSU regional committee for the traditional meeting of its members of parliament in the Bavarian resort town of Wildbad Kreuth. "We need a withdrawal therapy for commissioners intoxicated with regulation," the document, titled "Europe's Future: Freedom, Security, Regionalism and Public Responsiveness," reads. One of the stated goals of the document is to reduce the size of the European Commission. The CSU proposes the establishment of a new court to take tougher action against the Brussels agency exceeding its authority. "Disputes are to be decided by a European competency court, which would include constitutional judges from the member states." The CSU proposes that referendums be held for important EU decisions, and that EU powers generally be transferred back to the member states. "This could apply to parts of the overregulated internal market, as well as regional policy," the document reads.

The chancellor doesn't want to go that far. But her pivot away from Germany's traditional policy on Europe is also easy to misunderstand. Merkel wants less "Brussels" but "more Europe." But to bring joint control into the Brussels body to which she belongs, the European Council, Merkel must publicly confront the European Commission with its mistakes, so as to deprive it of some of its power. The opponents of Europe are just waiting for that, even in their own camp -- and they are far from satisfied with merely a little more emphasis on the German language in Brussels offices.

BY NIKOLAUS BLOME, PETER MÜLLER, CHRISTIAN REIERMANN, GREGOR PETER SCHMITZ AND CHRISTOPH SCHULT.

Translated from the German by Christopher Sultan.

Steinbrück attacks Merkel over Greece bailout

Πηγή: European Voice
By Toby Vogel
Sept 2 2013

Centre-left challenger calls for “Marshall Plan” for ailing eurozone members.

Peer Steinbrück, who hopes to unseat Chancellor Angela Merkel in Germany's general election on 22 September, has attacked Merkel for imposing “a deadly dose” of austerity on Greece and other troubled eurozone economies.

The Social Democratic challenger made his comments during a 90-minute live television debate last night (1 September), the only one before the election later this month.

But Steinbrück's criticism was not substantially different from earlier attacks that Merkel has so far been able to shake off; having served as Merkel's finance minister in the ‘grand coalition' of 2005-09, the centre-left Steinbrück is constrained in his attacks.

Steinbrück, who has been lagging badly in opinion polls, accused Merkel's centre-right coalition of pushing Greece into a “vicious circle” of debt and depression, and said that eurozone economies in trouble needed “a second Marshall Plan”, a reference to American aid that helped European economies recover after the Second World War.

He said that Germany “must not forget” US aid after 1945.

Gerhard Schröder, a Social Democrat who is Merkel's predecessor as chancellor, a couple of weeks ago accused Merkel of lying to voters about the need for a new bail-out for Greece.

Merkel has been trying to keep the question of another Greek bail-out under wraps until after the election, a bid made harder when Wolfgang Schäuble, her finance minister, last month admitted that another bail-out might be on the cards.

Steinbrück did manage to corner Merkel on the alleged spying on Europeans by US intelligence services, an issue that has made waves in Germany.

Opinion polls after last night's debate were inconclusive about who might have won, with one poll giving the lead to Merkel and another to Steinbrück.

Analysts suggest that Steinbrück's main chance would be the implosion of the Free Democrats, Merkel's junior partners in the current coalition, which would force her to seek the support of either the Greens or the Social Democrats.

What’s Missing in the Latest Greek Bailout

Πηγή: New York Times
Nov 30 2012

The new Greek bailout deal agreed to Tuesday by euro zone finance ministers and the International Monetary Fund is a clear improvement over earlier deals. It recognizes that Greece’s current and projected ratios of debt to output are unsustainable. It prescribes useful steps to lower that ratio, including lower interest rates on loans from Greece’s European partners, longer bond maturities and a plan for Athens to buy back and retire some of its heavily discounted bonds.

Regrettably, it excludes more effective tools, like actual debt write-downs, which Germany’s chancellor, Angela Merkel, finds politically unpalatable. And in deference to Ms. Merkel, the deal postpones some of the promised relief until after German elections next September.

But its biggest mistake is conditioning relief on maintaining fiscal austerity. Greece’s only hope for long-term solvency is through aggressive measures to revive economic growth. These could include public investment in modernizing ports and infrastructure, tax cuts to encourage export industries, and better public education. Done right, such measures would more than pay for themselves by improving Greece’s competitiveness in global and European markets. The bailout deal should keep Greece financially solvent for the next few months, but the price could prove too much for Greece’s economy and society to bear. Beginning in 2016, Greece will be committed to extracting a budgetary surplus (excluding interest payments) from a shrinking economy. And it is expected to reduce debt-to-output ratios while output continues to fall.

Greece’s output is now almost 25 percent lower than it was in 2008. This year alone it will be down 6.4 percent.

Next year, factoring in the new package of tax increases and spending cuts approved by the Greek Parliament last month at European insistence, it is expected to fall even further. That means less business and less personal income to pay taxes. Unemployment is now over 25 percent. Health benefits for the long-term unemployed have already been cut. So have pensions for the elderly and wages for those still working.

Greece’s prime minister, Antonis Samaras, hailed this week’s debt agreement as the transformation of “endless austerity” into a program that “will lead to growth.” Unfortunately, it promises nothing of the kind, and Mr. Samaras’s fragile coalition shows signs of fracturing under the economic strain. It might not even be able to stagger on until the German election next year. If it falls, Greece could be headed for default and exit from the euro. That catastrophe can still be avoided — but only if Ms. Merkel decides to put the survival of Greece and the future of the European Union ahead of her own electoral calculations.