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Merkel Meeting Hollande Evokes Adenauer Ghost Castigating Losers

As Germany emerged from the rubble of World War II, Chancellor Konrad Adenauer said nothing was more important than uniting with former enemy France to ensure peace and deter the Soviet Union.

Europe can’t close its eyes to the danger of our time,” Adenauer said in 1950 as he worked with French statesmen Robert Schuman and Jean Monnet on the pact that later turned into the European Union that now binds 27 nations together.

Current German Chancellor Angela Merkel and French President Francois Hollande, who meet in France next week to commemorate the 50th anniversary of official Franco-German reconciliation, are under pressure to heed those words. The two leaders, trying to solve the biggest economic crisis facing Europe in more than 60 years, aren’t passing the test, said Drew Scott, a professor of EU studies at the University of Edinburgh.

While Hollande’s and Merkel’s predecessors were confronted with as many as 14 million German refugees, scores of cities flattened by bombs and the menace of the Soviets, the current generation of leaders oversees the second-richest region in the world after North America. Their failure to take the necessary measures to guarantee the euro’s survival is in stark contrast to Europe’s postwar period.

“The decisive action that was taken after World War II is inconceivable now,” Scott said. “Prevarication, uncertainty, kicking the can down the road are all hallmarks of the crisis and it’s become a soap opera of economic calamity.”

Indebted Nations

Adenauer worked with the French to set in train the pacts and institutions that helped put the shattered continent back together. Those are now jeopardized by disputes over how to save the 17-nation euro bloc as investors turn on southern nations that exceed debt and deficit limits, endangering banks, pushing up yields and angering German voters unwilling to bail them out.

Ten-year bond yields ranging from 1.5 percent for Germany to 25 percent for Greece show that markets are betting on European economies drifting apart.

While last week’s summit in the EU’s basecamp of Brussels, the 19th in a little more than two years, sparked a global market rally as leaders found common ground on providing Spain and Italy with short-term aid, Europe’s premiers and presidents are riven by splits over such ideas as bonds issued jointly by countries sharing the euro.

“You need extraordinary leaders in a crisis like this, but you won’t find many people in the world who are looking to Brussels for the way out of this crisis,” said Fredrik Erixon, head of the European Centre for International Political Economy in the Belgian capital.

Euro Bonds

Merkel, the seventh German leader to succeed Adenauer, repeated her opposition to euro bonds after 13 1/2 hours of talks in Brussels on the night of June 29 as she tried to keep the faith of an electorate jaded by its role as Europe’s paymaster. Italian Prime Minister Mario Monti, 69, countered that euro bonds are needed to shore up a European project that has put an end to centuries of armed conflict in Western Europe.

Merkel complained June 16 about Greece holding other countries “hostage” by threatening to renege on bailout agreements. Sixty percent of Germans want Greece to exit the single currency, up from 49 percent in November, a ZDF television survey on May 25 showed.

“The current generation of European leaders may be an uninspired one, lacking in what the elder President Bush called ‘The Vision Thing,’” Ray Douglas, a professor of history at Colgate University in Hamilton, New York, said in an e-mailed response to questions. “They are a faithful reflection of the ambivalence of their electorates.”

German Refugees

Douglas is the author of “Orderly and Humane: The Expulsion of the Germans after the Second World War,” published this year. It describes how Germany had to cope with an influx of 12 million to 14 million German-speaking refugees, mainly from eastern Europe. Between 500,000 and 1.5 million were killed or died of disease.

Adenauer, the German leader from 1949 to 1963, pushed for European unity, reconciliation with France after three wars from 1870 and 1945 and ties with the U.S. buttressed by the North Atlantic Treaty Organization.

Other statesmen shaping the era included British Prime Minister Winston Churchill, U.S. Secretary of State George C. Marshall, whose Marshall Plan gave $13 billion worth of aid to rebuild Europe, and later John F. Kennedy, whose 1963 speech in West Berlin as U.S. president set the tone for galvanizing Europe during the Cold War.

Piecemeal Steps

“You need somebody to make a speech in Berlin and say ‘Ich bin ein European,’” said Bill Dinning, head of global strategy at investment company Kames Capital in Edinburgh. “Somebody leading people into something they’re afraid of, but something that is actually in their best interests. If they don’t, they’ll throw away 67 years of progress.”

The progress has so far been achieved piecemeal rather than through one grand vision, as decisions are typically made collectively rather than by a political chief, and often are subject to national approval.

Negotiations on a revised EU accord, known as the Lisbon Treaty, began in 2001. It went into effect eight years later after all countries had ratified the plan. Ireland had to vote twice after voters rejected the pact the first time.

The bloc has grown into 27 countries spanning from the Atlantic to the Black Sea since West Germany, France, Italy, Belgium, the Netherlands and Luxembourg signed the Treaty of Rome in 1957. Seventeen of the nations have adopted the euro since its arrival in 1999, cementing monetary ties.

Different Age

“European leaders now have to bring people on board and it’s with backroom negotiations rather than tub-thumping,” Robert Gildea, professor of modern history at Oxford University, said in a telephone interview. “We aren’t in a world war crisis, but we are in a serious crisis. The European leader now has a different image, a different cut.”

EU President Herman van Rompuy and European Commission President Jose Barroso represent that style. The former Belgian and Portuguese prime ministers came to their posts after European governments compromised on candidates.

“Van Rompuy was given a task not to shine, not to take air time from other leaders and not to trespass on their turf,” said Erixon at the research center in Brussels.

With Germany paying the single biggest share of the international bailouts for Greece, Ireland, Portugal and now Spain and Cyprus, Merkel is insisting on deeper spending cuts and revamped labor laws for indebted nations. Investor and philanthropist George Soros said in a June 24 Bloomberg television interview that she is a “strong leader” going in the “wrong direction.”

‘Zero Leadership’

German taxpayers are on the hook for about 211 billion euros, or 27 percent of the commitments made to the European Financial Stability Facility.

“There’s no longer European leadership like in the age of Churchill or de Gaulle,” said Shada Islam, an analyst at the Friends of Europe policy-advisory group in Brussels. “Everybody is looking out for their own short-term interests. We’re living in a world of G-Zero: zero leadership.”

When investors look back in 10 years, Hollande might be the one who emerged as the promoter of an economic revival in Europe by pressing for less budget austerity, Gildea said. Scott, the Edinburgh professor, said it may be Italy’s Monti who leads the region from crisis because he has the ear of EU bureaucrats after serving as a European commissioner for almost 10 years.

Risks Deepen

Fixing the euro requires giving up local political interests for the greater cause and embracing pan-regional borrowing and a further writeoff of Greek debt, according to Dinning, the strategist in Edinburgh whose company is part of Dutch insurer Aegon NV (AGN) and oversees 50 billion pounds ($78.5 billion) of assets. Without that, the danger is the euro region might “drift into chaos,” he said.

Today isn’t comparable with what leaders had to do to put Europe back together after World War II, according to Jan Techau, director of the European Center of the Carnegie Endowment for International Peace in Brussels.

Under Adenauer, West Germany became one of the six founding members of the EU a little more than a decade after the Nazis were defeated and the country was in tatters. The nation’s export-driven economy boomed, slashing unemployment by the mid- 1950s and facilitating the settlement of refugees, Douglas writes in his book, according to an online preview.

“For real leadership you need a feeling of a mortal threat, both in the electorate and the elite, and they don’t have it yet in Europe,” Techau said during a visit to Berlin. “It could be that we have this leadership and it’s only for the later generation to decide if we had greatness. The audience of the present is usually the worst judge.”

To contact the reporters on this story: Rodney Jefferson in Edinburgh at r.jefferson@bloomberg.net Leon Mangasarian in Berlin at lmangasarian@bloomberg.net

To contact the editor responsible for this story: Tim Quinson at tquinson@bloomberg.net

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