Oct. 3 (Bloomberg) -- Three days before East and West Germany reunited in 1990, Angela Merkel made an acquaintance that was to put her on the path to power.
An East German scientist propelled into politics by the fall of the Berlin Wall and the communist regime’s collapse, Merkel wangled an audience with Helmut Kohl at a party event in Hamburg. Within four months, Kohl had ridden German reunification to a landslide third election victory and Merkel secured a post in his Cabinet.
Just as Kohl knew what Germans on both sides of the border wanted when they united 22 years ago today, Merkel is tuned in to voters who balk at paying the price of the united Europe Kohl brought about. While her peers in France, Italy and Spain have been removed in the three years since the debt crisis emerged in Greece, Merkel’s ability to channel domestic public opinion paired with a still-expanding economy led polling company Forsa to conclude that she looks unbeatable before 2013 elections.
“The crisis makes people rally behind Merkel,” Gerd Languth, a historian and professor of politics at the University of Bonn whose 2005 biography of the chancellor documents her meeting with Kohl, said by phone. “People see her as being on top of the issues and the only one who can solve the problems.”
Bucking the crisis that has unseated contemporaries including her ally French President Nicolas Sarkozy is shaping up to be the theme of Merkel’s campaign for the election due next fall. Its resonance with voters will determine whether she emulates Kohl and serves a third term. Outside the 17-nation euro area, U.K. Prime Minister David Cameron’s Conservatives trail the opposition Labour Party by as many as 10 percentage points as he pushes the deepest budget cuts since World War II.
Voters credit Merkel for ensuring Germany is “the only economic safe haven in Europe,” Horst Teltschik, Kohl’s deputy chief of staff and a key adviser on German reunification, said in a telephone interview. “There are no other strong leaders in Europe.” Merkel is “the rock at the center of the euro-crisis storm.”
Merkel’s speeches channel Germans’ historical aversion to debt and profligacy forged in the aftermath of two world wars and marry them to Kohl’s legacy of a more integrated Europe. She’s seen to be “holding the line on debt mutualization” while finding a “middle way” on Europe, said Langguth. Vilification of Merkel with headlines and placards comparing her with Hitler only makes Germans swing behind her, he said.
Robots to China
Merkel, 58, the key political player in nearly three years of crisis-fighting, is aided by an economy that has yet to bear the scars of the turmoil dealt to fellow euro members.
Buoyed by growth in China and the U.S., Volkswagen AG, Daimler AG, and Bayerische Motoren Werke AG have so far proved resilient to the plunge in sales that has plagued European rivals such as PSA Peugeot Citroen of France and Italy’s Fiat SpA. Kuka AG of Augsburg, Europe’s biggest maker of assembly-line robots, raised its outlook for 2012 as it expands in China. Germany’s 30-member benchmark DAX index is up almost 25 percent this year compared with a near 11 percent rise in the Dow Jones Industrial Average.
In Spain and Greece, the crisis front line, unemployment is touching 25 percent; even across the Rhine in France joblessness is at a 13-year high. In Germany, Europe’s biggest economy, it is at a two-decade low. While all Europe tightens its belt in fear of the future, Germans’ satisfaction with their economic situation was at an 11-year high in July, FG Wahlen found.
Merkel’s edge over three opposition leaders is now so wide in a Forsa poll that she “appears unbeatable” a year from the election, Stern magazine said Sept. 19. Peer Steinbrueck, Merkel’s first-term finance minister who was nominated on Oct. 1 as her main challenger, trails her approval rating by 22 percentage points. She is Germany’s most popular politician and her approval rating is hovering near the highest since November 2009, a separate FG Wahlen poll released Sept. 28 showed.
The chancellor hasn’t offered her political foes much space to land blows as she preaches budget cuts for the euro area, refuses to underwrite the region’s debt with German economic might and barely acknowledges anti-austerity protests from Greece to Spain. Instead she tells weaker euro countries there’s no prosperity without pain.
“We remain true to our philosophy of no help without something in return,” she said in Brussels in June. That followed an all-night European Union summit at which Merkel fended off pressure from Italy and Spain for direct bank bailouts and government-backed buying of sovereign bonds.
Polls indicate that German voters like it when Merkel lays down her doctrine and holds the line against the euro area’s southern tier. Merkel is now getting higher approval ratings than Kohl ever did, said Matthias Jung, Mannheim-based FG Wahlen’s director.
“A growing part of the population realizes that there is no shining solution and that the crisis requires constantly defending German interests,” Jung said in an interview. Merkel is successfully defining herself in voters’ eyes as guardian of “the politics of common sense.”
The crisis has not always worked to her advantage. Re-elected in September 2009, Merkel’s personal and party popularity plunged after the first bailout for Greece in May 2010, leading to a run of state vote defeats. She took months to craft a policy meshing national interest with Germans’ desire after wartime devastation to be good Europeans.
The turning point came in December 2011 as she persuaded all but two of the EU’s members to sign up to her fiscal pact locking in common budget rules. From a low of 29 percent in a Forsa poll in 2010, her Christian Democratic bloc soared to a four-year high of 39 percent in August. Her bloc won 33.8 percent in the last national election on Sept. 27, 2009.
That trajectory brings Merkel closer to Kohl, who was first elected West German chancellor 30 years ago this week. In 1989, seven years into office, his popularity was languishing when he seized the opportunity provided by the fall of the Berlin Wall to push for a reunited Germany, winning a landslide victory in the first post-unification German elections in December 1990.
Merkel sought out Kohl two months previously at a party convention organized to formally unite Christian Democratic organizations in the two parts of Germany before Unification Day on Oct. 3, Langguth said in his biography, which comprises interviews with Merkel and her contemporaries. Merkel and Kohl met at the press party on the eve of the convention and had “a relatively long talk that evidently impressed Kohl,” he wrote.
Germans voted Kohl out in 1998 after a record 16 years in office, and Merkel broke with her one-time mentor the next year when he refused to identify secret campaign donors. Writing in the Frankfurter Allgemeine Zeitung newspaper, Merkel said he had broken the law and caused damage to the party he led for a quarter-century.
Now publicly reconciled, Kohl, who agreed in 1992 to give up the deutsche mark for the euro, passed the baton of his legacy on to a new generation at a Sept. 27 gala at Berlin’s German Historical Museum attended by his former protégée.
“Let us make good use of time,” Kohl, now 82 and in a wheelchair, said at the event, where he described Europe as a “grand goal” that others now have to carry forward. “Let us get going.”
A pastor’s daughter, Merkel’s austere Lutheran manner may fit the times even more than Kohl, the wine-loving West German who seized the moment and allayed fears of a bigger Germany with personal diplomacy. Merkel, seeking to extend her chancellorship to 12 years, told Kohl at the Berlin ceremony that he “defined an era.”
Merkel cites East Germany’s economic collapse after decades of rot as a defining moment. Her methodical, home-spun image is part of her appeal as Germans contemplate their position as the chief underwriter of 386 billion euros ($500 billion) in pledges for Greece, Ireland and Portugal plus as much as another 100 billion euros for Spain’s banks -- with a sovereign rescue for Spain possibly ahead. The 700 billion-euro permanent bailout fund, the European Stability Mechanism, comes on top.
“I like to read files,” Merkel said in Berlin on Sept. 26. She relishes cooking with her physicist husband at her rural lakeside retreat north of Berlin, buys her own groceries in the capital and holds up the mythical “Swabian housewife” as symbol of German thriftiness in speeches. She doesn’t host dinner parties and lets off steam with “hiking, cooking, laughing,” the Sueddeutsche Zeitung newspaper quoted her as saying in response to questions from celebrities on Aug. 10.
“The instrumental word with Merkel is trust,” said Jan Techau, head of the Carnegie Endowment for International Peace office in Brussels. “People don’t understand the European Stability Mechanism or the fiscal pact, but they trust Merkel” and her “plain-spoken confidence in resolving the crisis.”
For all that the economy is slowing, with the Munich-based Ifo institutes’s gauge of business confidence at the lowest in more than two-and-a-half years, record-low German bond yields signal investor confidence in Germany as a safe haven. House prices in cities such as Berlin that were resistant to the boom-that-turned-to-bust in Ireland, Spain and the U.K. are rising so fast that billionaire investor George Soros said Sept. 10 the German capital was in “serious danger” of developing a bubble.
Merkel is disproving “the chorus of people in Europe saying for years ‘the end is near,”’ Techau, a former analyst at the German Council on Foreign Relations, said in a telephone interview. “But the end hasn’t come and the perception is that she’s steered us through it.”
As the crisis heads toward its fourth year, Merkel has signaled that the euro and her plan to shift the energy supply away from nuclear power will be her main campaign themes. Germany’s economic strength is buoying her for now against the Social Democrats, who backed joint euro-area bond issuance as recently as April and now urge pooling the region’s old debt. Polls show voters overwhelmingly back Merkel’s rejection of euro bonds.
To be sure, the latest Forsa poll for Stern published Oct. 2 showed the Social Democrats closing on Merkel’s bloc after announcing nominating Steinbrueck to run against her. The SPD gained three points to 29 percent, while her CDU/CSU fell by the same margin to 35 percent.
What’s more, Merkel’s current coalition with the Free Democratic Party doesn’t have a chance of reelection if current polls are correct. The FDP has been scraping along at between 2 percent and 5 percent support since 2010, far below the 14.6 percent it won in 2009.
Merkel told reporters on Sept. 17 that while she wants a re-run of her current coalition with the FDP, she wouldn’t “rule out” a return of the grand coalition with the SPD that she headed under her first administration from 2005 to 2009.
Even if Steinbrueck can maintain his party’s bounce, the SPD wouldn’t be in a position to choose if elections were held now. A coalition with his preferred partner, the Greens, would fail to win a majority according to all six leading German polling companies.
Gary Smith, executive director of the American Academy in Berlin, says that beyond trust, popular euro crisis policies and the economy, Merkel is also “recapturing the moral high ground” on European unification which, despite the euro crisis, remains important for many Germans.
“Merkel has made the CDU stand for something again,” Smith, whose research group promotes trans-Atlantic ties, said in an interview. “They stand for Europe and voters understand that Germany’s global role is through leading the EU, and it’s Merkel who’s providing that leadership.”
Merkel, pressed on her electoral intentions at a Sept. 22 meeting with French President Francois Hollande marking Franco-German postwar ties, said she’d “happily” serve another term.
“I don’t feel at all like I’m at the end of my mandate,” she said.
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