The ongoing war effort in Afghanistan has drained the patience of Western European governments and electorates alike. Polls consistently show that in most European NATO countries, the public has turned against the war while officials are openly beginning to question ISAF’s ability to bring peace and stability to the South Asian state wrecked by violence for almost a decade now. Read more “NATO Allies Weary About Future Afghan Mission”
Barack Obama has recommended that Europe stop attempting to rein in government spending with severe budget cuts. The economic recovery, according to the president, is still too fragile for government to pull out. The debate over austerity is likely to dominate the fourth G20 summit held in Toronto, Canada over the weekend.
Last week, the American president already warned European countries in general that their austerity measures threaten economic stability. He blamed Germany in particular for relying too much on exports which supposedly gives it an unfair advantage. Read more “Obama Urges Europe to Spend More”
Germany’s ruling coalition of Christian Democrats (CDU) and the liberal Free Democratic Party may be threatened with collapse this week, judging from continued internal dissent about the government’s announced austerity measures and the departure of senior conservatives from power.
Angela Merkel’s government announced heavy spending cuts three weeks ago amounting to a total of €80 billion to be saved on expenditures between now and 2016. Many of the chancellor’s own CDU lawmakers fear a voter backlash with the cuts being portrayed as socially imbalanced by the opposition. Almost 80 percent of Germans consider the budget cuts unfair; 67 percent is in favor of raising the top tax rate, something Merkel has strongly resisted. Public dismay over the program prompted thousands of Germans to take to the streets over the weekend in protest.
Within Europe, Merkel has been unable to fully satisfy Germany’s demands. She initially refused to consider a bailout of Greece and the multibillion euro rescue package that was enacted nonetheless has been highly unpopular in Germany. Merkel pushed for tougher sanctions against eurozone members in violation of European budget rules but to little avail: the European Commission along with a majority of member states has refused to comply. Reportedly, relations between Merkel and her French counterpart, Nicolas Sarkozy, have soured in the process.
Since last December, Merkel’s administration has also come under pressure over Germany’s participation in ISAF. German soldiers protested in April over what they perceive to be a largely futile mission. At home, the public is also turning: so much as 80 percent of Germans now favor pulling out of Afghanistan altogether.
The government’s unpopularity culminated last May in electoral defeat for the conservatives in North Rhine-Westphalia, Germany’s most populous and industrious of states. Not only did the CDU lose 22 seats in the state legislature; the ruling coalition was robbed of its upper house majority on the federal level.
The resignation of conservative heavyweights including Roland Koch, the state premier of Hessen, and Horst Köhler, until May 31 highly popular as President of Germany, have further left Merkel increasingly exposed. Two of her own cabinet ministers have even covertly expressed criticism of her policies: Karl-Theodor Guttenberg, often mentioned as a possible successor as CDU party leader, and FDP health ministers Philip Rössler whose efforts to reform Germany’s health care system have been frustrated by political infighting.
Merkel’s current, second cabinet was hailed as a release from the grand coalition between conservatives and socialists that ruled Germany between 2005 and 2009. The liberal FDP increased its share of the vote by almost 5 percent in the 2009 elections, allowing a right-wing majority in parliament.
An opinion pull conducted by German newspaper Bild recently showed 92 percent of managers in business and science disapproving of the ruling coalition. The liberals in particular are deeply unpopular: where they won almost 15 percent of the votes in 2009, today, they would manage to hold on to just 5 to 8 percent of their support. The conservatives and the Social Democratic Party would still garner one third and a quarter of the vote respectively which nearly equals their performance in last year’s election. Throughout Germany however, especially in the east, the SPD is slowly but gradually picking up votes from the far-left party Die Linke. Both the Social Democrats and the Green Party are already calling for new elections.
Europe’s finance ministers agreed last week to review each other’s national budgets in the future to prevent one or several member states from imperiling the stability of the common currency as happened in Greece this April. The move may end being a step in the right direction but little more than that.
The finance chiefs of the European Union met in Luxembourg on June 7 where they first approved the €750 billion rescue mechanism that was put in place by their government leaders in the wake of the Greek crisis before discussing broader measures that should help prevent such a calamity from developing again. Besides the controversial peer review procedure — which, according to The Blue Nation, Britain, for one, will never accept — tougher sanctions should be enacted whenever member states violate the eurozone’s budget rules.
The existing Stability and Growth Pact prescribes that eurozone countries cannot maintain deficits over 3 percent of GDP and must prevent the size of their national debts from rising above 60 percent of GDP. The treaty allows members that are in violation of its rules to be fined yet throughout the euro’s eleven year history, many countries, including France and Germany, have waved the rules several times while no one dared propose sanctions.
The new peer review scheme is similarly lacking in strength. Germany has pushed for tougher sanctions since March with support from smaller Northern European states like the Netherlands, but the European Commission, so far, has hesitated to submit to such ideas. Before anything else, it is desperate to prevent further discord among the member states.
Measures that could actually force European government to abide by the rules — such as temporarily denying them voting power or withholding access to European funds — have quietly been pushed off the table, in part because many governments are struggling to cope with increasing Euroskepticism at home and dread the prospect of having to enact another major accord after the eight years it took to pass the Lisbon Treaty.
Another initiative that been silenced to death was Germany’s suggestion, supported by Finland and the Netherlands, to introduce the possibility of an “orderly sovereign default” for eurozone members. Other governments feared that to so much as speak of default in this climate would unnecessarily upset financial markets.
In general, much of Europe has been annoyed by Germany’s unilateral push for austerity and reform. Chancellor Angela Merkel startled markets and neighbors alike last month when her administration abruptly banned naked short selling of eurozone government debt and financial stock, as well as naked credit default swaps involving eurozone debt which are blamed by some for deepening Europe’s ongoing debt crisis. Both European Council President Herman Van Rompuy and European Commission President José Barroso told the chancellor last week that they oppose new institutions and treaties to deal with the situation. “We do not need new institutions to meet our goals,” a statement released by Van Rompuy’s office read. “We need more effectiveness.”
The chancellor should prepare to face many frustrated colleagues in Brussels June 17 when European leaders convene to discuss European economic governance. They will discuss economic policy again in Toronto a week later when the G20 summit starts there on June 26.
While the Greek debt crisis and subsequent decline of the euro continue to worry investors around the world, the people of Europe are preparing for severe austerity measures, and not just in the troubled south.
With hundreds of billions of euros pledged to stabilize the common currency, European leaders are forced to make major cutbacks at home.
The new Conservative-Liberal Democratic coalition ruling Britain unveiled its financial plans on Tuesday. Shortly after Queen Elizabeth II opened Parliament, Chancellor of the Exchequer George Osborne and his Chief Secretary to the Treasury David Laws announced a reduction in public spending of £6 billion to be enacted this year.
Nearly all departments of government in the United Kingdom will be affected by the spending cuts except education. According to The Blue Nation, not included in the £6 billion savings are those set to be made in the departments for health, international development and defense as they are to be reinvested in the “frontlines” of those services.
The money saved will be allocated almost entirely to reducing Britain’s deficit. Business leaders were quick to support the measures while further encouragement came from growth figures also released on Tuesday. The British economy was able to boast a modest growth rate of 0.3 percent compared to last quarter.
The German government announced heavy spending cuts on Monday. Starting next year, Germany will have to cut at least €10 billion each year until 2016 to bring its public finances back under control. Chancellor Angela Merkel is reportedly considered to raise taxes in order to bring down the deficit — in spite of her campaign promise not to.
The Dutch are already among the most heavily taxed people of Europe yet they, too, will be confronted with spending cuts in health care and social services. The retirement age is set to be raised with two years, from 65 to 67, while several political parties have proposed to drop out of the Joint Strike Fighter program in order to save billions of euros.
Italy, finally, joined the ranks of other South European economies as Portugal and Spain in announcing multibillion euro spending cuts. The Berlusconi government is preparing to cut so much as €25 billion both in 2011 and 2012 according to plans leaked to Italian media. Gianni Letta, the prime minister’s lieutenant, spoke of the need to make “heavy sacrifices” lest Italy follow down the path paved by Greece.
In order to rein in spending, government will freeze salaries in Italy while refraining from hiring additional public servants. Financial support for provincial and local governments will be cut with almost €6 billion and measures to fight tax evasion are expected to be announced soon.
The situation is complicated by politics in many of the aforementioned countries. While the British just elected a new Parliament, the necessary spending cuts have become part of election campaigns in Germany and the Netherlands. Angela Merkel’s ruling coalition was robbed of its upper house majority earlier this month after losing a local election in Germany’s most industrious of states. The Dutch are likely to elect a center-right government once again two weeks from now to deal with the cutbacks while the Italians may also head for the polls ahead of schedule as Silvio Berlusconi’s governments appears on the brink of collapse.
Bending the rules of euro management, European leaders and finance ministers agreed to an unprecedented effort to guarantee the stability of the eurozone with loans adding up to nearly $1 trillion (or €750 billion) this weekend.
In spite of the multibillion euro rescue package previously pledged to Greece, investors continued to worry about the unsound fiscal policies of other eurozone members, including Ireland, Italy, Portugal and Spain. The value of the euro sharply decreased in recent days while protests in the streets of Athens last week shed further doubt upon the country’s chance to recover — and pay back its loans. Read more “Saving the Euro”
In response to the Merkel government’s decision to support a Greek bailout last week, voters in Germany’s western state North Rhine-Westphalia voted overwhelmingly against the chancellor’s ruling party, robbing her coalition of its majority in the upper house of parliament.
North Rhine-Westphalia held elections on Sunday. The state, with its capital at Düsseldorf, is the economic powerhouse of Germany, bordering on the Netherlands with close to eighteen million inhabitants. Boasting the industrial Ruhrgebiet, with over €541 billion, North Rhine-Westphalia is responsible for about 20 percent of German gross domestic product.
Germans at large have been skeptical of coming to Greece’s aid with Angela Merkel pushing for tougher sanctions that are meant to prevent a similar calamity from ever developing again. Her promises failed to persuade voters however. The Christian Democrats lost heavily in North Rhine-Westphalia, down from 89 seats in 2005 to 67 today.
The party’s foremost contenders, the Social Democrats, also lost seats: they went from 102 in 2000 to 74 in 2005 to 67 today. Neither major party holds a majority therefore, nor does Germany’s ruling coalition of Christian Democrats and liberals which now commands eighty seats in North Rhine-Westphalia’s legislature, eleven short of a majority.
The Greens were the election’s greatest winners, doubling their share of voters from 6.2 to a little over 12 percent to win 23 seats. With the Social Democrats, they are just one seat short of a majority.
It seems unlikely that either party will agree to a coalition with communist successor parties, including Die Linke. The far left enjoys support in East Germany but has never partaken in government in the western part of the country.
A grand coalition between Christian and Social Democrats is no less attractive; the latter risk further alienating left-wing voters if they agree to a coalition with the right.
The alternatives include an alliance of Green, liberals and Social Democrats. Such a coalition previously ruled the state of Brandenburg between 1990 and 1994. The other variant would see the conservatives, Greens and liberals working together as they have in Saarland since November of last year. Both coalitions might be plagued by infighting between the smaller parties, both vying for support with the majority partner.
At the federal level, Sunday’s election denies Chancellor Merkel and her coalition a majority in the Bundesrat, the upper house of parliament that represents the sixteen different German states. North Rhine-Westphalia has six votes in the council. The ruling parties are now three votes short of a majority. For future legislation, the government will have to win support from states that are governed by other coalitions, such as Mecklenburg-Vorpommern or Hamburg. Both have three votes on the council and are respectively governed by alliances of Christian and Social Democrats and Christian Democrats and Greens.
Defense Tech reports that German soldiers in Afghanistan are silently protesting against the perceived ambiguity of their mission’s purpose by snapping up patches that read “I fight for Merkel.”
The patches, technically illegal, are a big seller among German soldiers at Mazār-e Sharīf. The country’s ISAF forces have been hit hard in recent weeks, losing seven of their troops during the last month alone. Forty-four Germans have been killed since they first entered Afghanistan eight years ago. Adding to the losses is frustration with the relatively restrictive rules of engagement under which Bundeswehr personnel is forced to operate. Only under the rarest of circumstances may they aid fellow NATO countries in combat outside of their own zone.
Increasingly, German public opinion is turning against the mission. So much as 80 percent of the people is now in favor of pulling German forces out of Afghanistan. As more lives are lost, opposition to the mission is steadily mounting.
The government has in part itself to blame. From the start, politicians tried to portray the Afghan mission as little more than a police effort, stressing aid and development work while downplaying the very real risks involved. “Deaths, injuries, battles and heavy weaponry — none of these suit the picture that was painted back then,” observed the Financial Times Deutschland earlier this week.
Chancellor Angela Merkel’s failure to explain just what German troops are fighting and dying for is cause for concern both at home and abroad. German troops, evidently, are equally disheartened by their political leadership’s inability to state explicitly for once what their comrades are sacrificing their lives for.
With over 4,000 troops currently stationed in Afghanistan, Germany is the third largest contributor to ISAF in terms of numbers. Germany leads the Regional Command North which oversees the provinces of Badakhshan, Baghlan, Kunduz and Takhar.
German chancellor Angela Merkel met head on with the European Commission on the Greece question over the weekend. Chairman José Barroso is pushing European governments to commit to a Greek bailout this Thursday when member states convene in Brussels. Merkel is having none of it.
The chancellor declared on German radio on Sunday that no bailout is being considered. The Greeks themselves, after all, haven’t asked for help, she said. Barroso responded in today’s Handelsblatt, urging European states to find a solution, regardless of their internal politics. Read more “Greece Continues to Divide Europe”
Euroskepticism is abound anew. Where previously economist Paul Krugman argued that Greece could have weathered its fiscal crisis if it had retained its own currency, Judy Dempsey reports that Germans are increasingly nostalgic for their Deutsche Mark.
“For Germans,” writes Dempsey, “the mark was more than just currency.” It represented the country’s postwar recovery, the Wirtschaftswunder that made Germany within mere decades the strongest economy of Europe.
Should they be forced to bail out an ailing eurozone neighbor as Greece, Spain, maybe Portugal, “resentment against Europe and the common currency” would certainly intensify among most Germans.
Chancellor Angela Merkel is in a tough spot. “She knows that the euro has been good for Germany, despite the resentment.” Stable exchange rates have encouraged trade and growth. “But bailing out Greece would be terribly unpopular.” Read more “Euro Resentment Demands New Rules”