Conservatives in Germany Suffer Defeat at Polls/Financial Crisis Tests Germany’s Ability to Lead

Conservatives in Germany Suffer Defeat at Polls
By NICHOLAS KULISH
Copyright by The New York Times
Published: May 9, 2010
http://www.nytimes.com/2010/05/10/world/europe/10germany.html?th&emc=th


BERLIN — Chancellor Angela Merkel’s conservative bloc lost its grip on the upper house of Germany’s Parliament on Sunday, as voters in an important regional election dealt her party a strong setback seen as the first significant political fallout from the Greece crisis.

A wide majority of Germans had opposed bailing out the heavily indebted Greek government, but Mrs. Merkel pushed Germany’s part of the $140 billion rescue package through Parliament last week.

Mrs. Merkel’s effort had been expected to cost her Christian Democrats in the regional election in North Rhine-Westphalia, Germany’s most populous state, but the steep drop of 10 percentage points compared with the last election, in 2005, was even larger than most analysts had predicted and gave the Christian Democrats their worst postwar showing in that state.

The loss means Mrs. Merkel can no longer count on a majority for her governing coalition in the upper house of Parliament, composed of delegations from all 16 states. “This is a debacle for the government,” said Peter Lösche, emeritus professor of politics at the University of Göttingen.

The message in the North Rhine-Westphalia vote could have repercussions that reach well beyond its borders, undermining Mrs. Merkel, leader of the continent’s largest economy, just as the European Union struggles to contain the widening fallout of the Greece debt crisis. The uncertainty has challenged the very existence of the common currency, the euro, and decades of progress in European integration.

The vote coincided with an emergency meeting in Brussels of European Union finance ministers seeking ways to head off chaos in the financial markets.

“It’s not good timing for one of the biggest players on the team to face domestic questions and her leadership at stake,” said Silvio Peruzzo, euro area economist at Royal Bank of Scotland in London. But Mr. Peruzzo said he did not expect the vote to fundamentally alter market perception of the crisis.

“I don’t think it’s a turning point in the way Germany and the other euro zone leaders will tackle the most important issue in front of them,” Mr. Peruzzo said.

Jürgen Rüttgers, the Christian Democratic state premier in North Rhine-Westphalia, said Sunday that he personally took “political responsibility” but cited “a bundle of reasons” for the party’s poor showing. Assigning blame and dealing with the consequences will test Mrs. Merkel’s ability to maintain party discipline at this difficult juncture.

Mr. Rüttgers’s image was damaged by a party fund-raising scandal, and local issues like education and the troubles of municipalities with heavy debt burdens were central to the campaign.

The Christian Democrats won 34.6 percent of the vote and their left-wing opponents, the Social Democrats, won 34.5 percent. The Free Democrats, the coalition partner of the Christian Democrats, won 6.7 percent.

The biggest gains were by the Green Party, which nearly doubled its tally to 12.1 percent, and the far-left Left Party, with 5.6 percent, enabling it to enter the state Parliament for the first time.

The Left Party has fought for respectability in western Germany despite mistrust because it was built in part on the remnants of the former Communist Party of East Germany. By clearing the 5 percent hurdle for representation in the state Parliament, the Left Party, which is also made up of former Social Democrats disillusioned by that party’s centrist policies of recent years, scored a significant victory.

The question now is whether the Social Democrats would risk alienating voters by forming a governing alliance in North Rhine-Westphalia with the Left Party as well as the Greens, their preferred partners.

The vote was the first state election since Mrs. Merkel won re-election in the fall, with a second term marked by bickering with the pro-business Free Democrats, the junior party in her ruling coalition. Analysts stressed that while the North Rhine-Westphalia results would weaken Mrs. Merkel’s hand, they were not a catastrophic defeat for her.

“Her leadership within the party won’t be called into question as a result of one electoral defeat,” said Karl-Rudolf Korte, professor of political science at the University of Duisburg-Essen. “But if you see additional defeats down the line, those questions will be raised.”

Losing her majority in the upper house of Parliament means Mrs. Merkel must compromise with opposition parties to pass major legislation, including overhauling health care, cutting taxes and extending the operation of nuclear power plants.

Her predecessor, Gerhard Schröder, lost the chancellorship in 2005 after a defeat in North Rhine-Westphalia, a western industrial state with more than one-fifth of the country’s population. Yet without a strong rival in the ranks of her party, Mrs. Merkel seemed secure in her position as chancellor, even if her standing was diminished by the electoral setback.

“This will cause a dent in her public image,” said Thomas Poguntke, professor of political science at the University of Düsseldorf in North Rhine-Westphalia. “The message is really that the government hasn’t been doing terribly well in the eye of the public.”

The Free Democrats had campaigned for significant tax cuts, which surveys showed voters rejecting at a time of growing budget deficits.

“This is clearly a warning shot for the governing parties, and the people should know that it has been heard,” Guido Westerwelle, vice chancellor from the Free Democrats, said Sunday on German television.

For Mrs. Merkel, who seemed more comfortable with her old centrist government than her alliance with Mr. Westerwelle’s party, the defeat could ultimately give her political cover from the more conservative elements in her government to follow the middle road that has brought her success.

“Now she can argue to her own party, ‘I have to work with these Greens. I have to work with these Socialists,’ ” Mr. Lösche said.



Financial Crisis Tests Germany’s Ability to Lead
By NICHOLAS KULISH
Copyright by the Associated Press
Published: May 10, 2010
http://www.nytimes.com/2010/05/11/business/global/11germany.html?th&emc=th


BERLIN — At a defining moment for the European Union, its largest country, Germany, appeared divided and its leader absent, raising significant concerns about what kind of leadership Chancellor Angela Merkel can offer as the region tries to stabilize financial markets and shore up its common currency.

As Mrs. Merkel sat in Moscow on Sunday watching a military parade commemorating Nazi Germany’s defeat in World War II, her governing coalition lost control of Germany’s most populous state, and with it the upper house of Parliament. And while European finance ministers and the International Monetary Fund hammered out a nearly $1 trillion rescue fund to deal with the region’s debt problems, the German finance minister, Wolfgang Schäuble, was confined to a hospital, unable to attend the meeting.

“What Now, Chancellor?” asked the front page of the tabloid Bild on Monday. It was the very same newspaper, Germany’s highest-circulation daily, that led and gave voice to a populist campaign against bailing out Greece.

Heeding that public anger, Mrs. Merkel delayed concerted action to combat the financial turmoil that moved beyond Greece and threatened the stability of the region that uses the euro as its currency.

“German politicians used this only for domestic political purposes, narrowly formulating the most traditional views of German voters,” said Jacques Mistral, director of economic studies at the French Institute of International Relations in Paris. “They missed this opportunity and gave a poor picture to the rest of the world of their leadership.”

The influential daily Süddeutsche Zeitung was among several that suggested that President Nicolas Sarkozy of France, who canceled his own trip to Moscow because of the euro crisis, had claimed the spotlight from a dithering Mrs. Merkel. “Now she must live with the judgment that the rescue umbrella à la française could have been put together weeks ago, but she drove the price higher unnecessarily,” the paper said Monday.

Her supporters, and even some detractors, say the picture is more complex. They say Mrs. Merkel is a politician skilled in the art of the possible, who exercised patience to overcome difficult circumstances.

In this more sympathetic version, Mrs. Merkel helped raise the pressure on the Greek government to agree to tough but necessary cutbacks in public spending. At the same time, the resentment of average Germans yielded to fear for the stability of their currency, making last week’s rescue of Greece and Sunday night’s larger rescue package possible.

“I think Merkel was right in holding back, for domestic reasons to overcome the resistance and for external reasons to soften up the Greeks and others,” said Josef Joffe, editor of the German weekly Die Zeit. “Right now the morality play is, it’s her fault. I’m not her henchman, but on balance I think she did O.K., given what Germany’s underlying interests are.”

“If this works, we’ll look back two or three years from now and say, ‘Look what an ingenious woman she is,’ ” Mr. Joffe said.

In the short term, attention remains focused on Mrs. Merkel’s setbacks. Her Christian Democrats fell more than 10 percentage points in North Rhine-Westphalia’s state election on Sunday, compared with the last vote there in 2005. While the party clung to the largest share of the vote in the state, its 7.7 percentage-point advantage over its left-wing rivals, the Social Democrats, shrank to 0.1 percentage point.

The Christian Democrats lost their ruling coalition in the state with the pro-business Free Democrats, and as a result effective control of the upper house of Parliament, where each of Germany’s 16 states is represented.

“We suffered — and there’s no talking our way around it — a bitter defeat,” Mrs. Merkel said at a party news conference on Monday, the morning after the election. She said that planned tax cuts would have to be abandoned.

But she quickly shifted her attention to the legislation needed to pass Germany’s share of the nearly $1 trillion emergency rescue fund.

She said her cabinet would meet Tuesday to approve the measure, saying it was necessary to ensure the stability of the common euro currency, but also “to protect the money of our German citizens.”

Daniela Schwarzer, expert on European Union affairs at the German Institute for International and Security Affairs in Berlin, said that the larger rescue fund could be easier to sell to the German public than the Greek bailout was, because of the public disapproval in Germany at what was seen as the irresponsible spending of the Greeks.

“I expect the public perception of the next round is that there is contagion to others and they are victims of the financial markets,” Ms. Schwarzer said. “This could be a new story to sell the big umbrella that is being put into place.”

While Mrs. Merkel may win passage of the stability package, the loss of control of the upper house of Parliament would have long-reaching consequences for her, according to Mr. Joffe of Die Zeit. As a result, all major legislative initiatives will require the approval of opposition parties, a recipe for gridlock that will hamstring her at home and beyond Germany’s borders.

“The country destined to take the leadership mantle in Europe will not be able to don it,” Mr. Joffe said. “She will not be able to lead, even if she wanted to.”