Bloomberg News

Merkel Seeks Debt-Crisis, Legislative Victories Before Campaign

June 02, 2013

German Chancellor Angela Merkel

With German Chancellor Angela Merkel’s Christian Democratic Union leading in all national polls, she will aim to leverage her record of buoying Germany’s labor market and export-led growth through the three-year-old crisis. Photographer: John MacDougall/AFP via Getty Images

Chancellor Angela Merkel begins a month of parliamentary debate and debt-crisis negotiations this week before German politicians turn to campaigning ahead of national elections in September.

Germany’s lower house of parliament, or Bundestag, convenes this week as it wraps up its final sessions of the 2009-2013 legislative term at the end of June. Merkel is also preparing for a June 27 European Union leaders’ summit that will focus on how to fight unemployment and recession.

“The distance that we have yet to overcome remains hard and long,” German Finance Minister Wolfgang Schaeuble wrote in an op-ed in Tagesspiegel yesterday. “It is crucial that we maintain our common European policy of consolidation and reforms to create truly sustainable growth.”

With Merkel’s Christian Democratic Union leading in all national polls, the chancellor will aim to leverage her record of buoying Germany’s labor market and export-led growth through the three-year-old crisis. Merkel is hewing to her insistence on boosting euro members’ competitiveness even as EU leaders back off the German-led austerity agenda.

The Bundestag is set to debate issues such as the minimum wage, immigration and nuclear waste this week as politicians position themselves for the Sept. 22 national election.

Poll Lead

Merkel’s CDU held steady at 40 percent, while the opposition Social Democrats under chancellor candidate Peer Steinbrueck slid a percentage point to 26 percent, according to a poll published yesterday by Emnid. With the survey showing the CDU-allied Free Democrats with 5 percent and the SPD-aligned Green Party with 14 percent, Merkel would be in position to lead a so-called grand coalition for a second time.

The chancellor signaled last week that she’ll campaign on her stewardship during the crisis.

“We have to stand up for a strong euro, while making demands” for reforms in euro countries, Merkel said May 28 during a CDU-hosted call-in web cast. “I think there will be a lot of talk about precisely this topic during the election campaign. It will be an absolutely key point.”

Introducing Merkel’s crisis management as a campaign issue poses a risk to the SPD, which while criticizing her pro-austerity stance, has avoided confronting the popular chancellor on the subject in favor of prioritizing issues such as wealth distribution and housing prices.

Economic Overhaul

Merkel’s party, bracing itself for a challenge from the anti-euro faction Alternative for Germany, will “set down a marker” by “making it clear once again that Germany can only do well if Europe does well,” the chancellor said. The CDU will unveil its party platform on June 24.

The German leader’s insistence on euro states’ overhaul of their labor markets and economies in return for leniency on budget targets was on display May 31 in Paris, as Merkel pressed France on reform even after President Francois Hollande said his agenda won’t be “dictated” by the European Commission.

Nations including France, Spain and Italy gained greater fiscal flexibility as the European Commission last week shifted away from austerity to stem the euro-area economy’s longest slump and reduce a 24 percent youth-unemployment rate.

“We agreed to the commission’s giving France two more years to meet the deficit target of 3 percent coupled with the expectation -- and the French president just confirmed that -- that reforms are undertaken,” Merkel told reporters in Paris last week. “The two things go hand in hand.”

Common Ground

The Merkel-Hollande meeting aimed to find common ground between Germany and France ahead of the summit. The two leaders emphasized a front-loading of 6 billion euros ($7.8 billion) in funds designed to combat youth unemployment.

Europe “can’t afford to lose its children to populists and extremists,” Schaeuble wrote in the Tagesspiegel op-ed, adding that the 6 billion euros, as well as 16 billion euros in EU structural funds, must be deployed “swiftly” to ease the scourge of unemployment.

Europe’s easing off its focus on fiscal consolidation also dovetails with the German election campaign. Handelsblatt newspaper on May 30 tallied that CDU campaign pledges, including maternity and disability benefits and tax exemptions, would add up to 28.5 billion euros.

To contact the reporter on this story: Patrick Donahue in Berlin at pdonahue1@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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