article

06.24.10

Hard Times for Angela Merkel

Having antagonized President Obama and desperately needing international help for her initiatives, the once popular German chancellor has lost her political strength at a particularly bad time. Thomas Jahn reports on her coming G-20 struggle.

Angela Merkel makes for a great story: Germany`s first woman chancellor and the first to come from East Germany. After she took over in 2005, Merkel was beloved and respected by a large majority of Germans. And from the outside, with the handling of the Greek crisis and the recent cost-cutting in the federal budget, it looks as if she is still firmly in the driver’s seat.

But nothing could be further from the truth. At home, Merkel is in the middle of a political storm. Fighting for her political survival, she will be in a weak position at the upcoming G-20 meeting in Toronto.

Foreign policy is usually a strength for Merkel, but the euro crisis has damaged her reputation at home and across Europe.

Her talent as a realpolitiker is hard to challenge. After the fall of the Berlin Wall more than 20 years ago, the 55-year-old rose rapidly through the ranks of the Christian Democratic Party (known as the CDU) with the help of former Chancellor Helmut Kohl. With every step up the ladder of success, she showed a remarkable sense for playing the power game. Cold-blooded, she got rid of most rivals long before they even knew that they were in competition with her. She even sacrificed her mentor, Kohl, pushing him aside after his involvement in a CDU donor scandal in 1999.

Ironically, her political talents are now creating problems for her. A couple of weeks ago, German President Horst Köhler stepped down. Sensing an opportunity, Merkel nominated to the largely ceremonial role Christian Wulff, a successful politician within the CDU and leader of the state of Lower Saxony. At first glance, it looked like a clever move. Wulff is a possible challenger to Merkel, and his appointment to the post would put him out of the picture. In answer to Wulff, the SPD and Green Parties nominated Joachim Gauck as their candidate. The human-rights activist from the former East Germany is a very popular figure in Germany, and suddenly Wulff is looking like a stale choice. Most likely, the majority of the CDU and their allies in the FDP will vote for Wulff on June 30. But some of them will switch sides, embarrassing Merkel.

In normal times, a sideshow like this would not have bothered Merkel. However, it’s all happening just as Merkel announced a $100 billion cost-cutting package. In general, Germans are very much in favor of reducing deficits. But cutting in this way made people angry, since it is mostly low-income families that will have to carry the burden. Add to that the reducing of taxes for the hotel industry a couple of months ago, and critics have had a field day, painting Merkel as insensitive to the needs of everyday people and as a marionette of the rich and powerful. Since May, her approval rating has dropped 18 percentage points, to 40 percent—her lowest rating since coming to power.

Foreign policy is usually a strength for Merkel, but the euro crisis has damaged her reputation at home and across Europe. The Germans are not in favor of bailing out Greece, which is why she waited so long to do anything more than scold the Greeks for their irresponsible behavior. Only after a public demotion of Helmut Kohl, one of the principal founders of the euro, did the chancellor have a change of heart and sign a bailout package of $1 trillion in early May. In that way, she got the worst of both worlds. The CDU lost a state election in North Rhine-Westphalia on May 9. And Europe paid a high price, as Merkel`s foot-dragging allowed a crisis of confidence to spread to other peripheral countries, including Spain and Portugal.

Merkel`s weakness comes at a particularly bad time. Several of her initiatives, including those dealing with the regulation of financial markets and taxes on financial transactions, require international cooperation. It’s far from clear now that she’ll have the support she needs to get it.

The French are irritated by the Germans’ reluctance to save the euro. And Barack Obama is criticizing her cost-cutting as the wrong move in an economically difficult time.

Normally, Obama's criticism would mobilize Germans and cause them to rally around their chancellor. But not this time. Again, Merkel gets the worst of both worlds: trouble at home and abroad. It was much easier for Merkel under George W. Bush, who was very much disliked in Germany.

Of course, Merkel will argue for her causes in Toronto. But do not expect any results.

Thomas Jahn has been a New York correspondent for Capital, Germany's largest business magazine, since 1999. He is also a contributing editor for Financial Times Deutschland. He writes about business, financial markets, and politics.