June 14 (Bloomberg) -- Angela Merkel’s sheltered childhood as a pastor’s daughter living behind the Iron Curtain was no preparation for the job of steering Europe through its most serious economic crisis in decades.
Yet when faced with political and market turmoil that at one stage threatened to tear apart the 17-nation euro region, she learned fast. In their book “Angela Merkel: A Chancellorship Forged in Crisis,” Bloomberg News journalists Alan Crawford and Tony Czuczka track Merkel’s cautious course, often criticized as faltering and hesitant, through the uncharted waters of Europe’s subprime, economic and sovereign debt crisis.
Crawford and Czuczka reported every last episode of those turbulent months. Their book shows how Merkel’s vision of Europe and capacity to lead it developed in the chaos. She is fighting for re-election from a position of strength, they say.
They talked to Catherine Hickley in the Bloomberg Berlin office.
Hickley: Merkel grew up in a planned economy. Did she have any idea of how a market economy functioned at that time?
Czuczka: She grew up very sheltered as a child and young woman in East Germany, and then went into a job as a physicist, highly theoretical and also sheltered.
There is one episode showing she figured out as a school-age child that the East German economy had contradictions. She picked blueberries and after her mother had taken what she needed, she sold the rest to the store for 4 marks to boost her income. Then one of her gang would go back and buy a kilo for 2 marks because the communist authorities subsidized food.
Hickley: There is one anecdote in your book describing how she received a text from an adviser while at the opera saying that the IKB (Deutsche Industriebank AG) is in trouble, the first sign of the subprime crisis in Germany. She texted back “What’s IKB?”
Crawford: Yes, she was taken by surprise. She said in one speech that suddenly the lowest figures we are discussing are billions instead of millions, and this was new to all of us. She used to say frequently “I am not an economist.” She has stopped saying that.
Czuczka: One of the people who got to know her around that time told us that the collapse of East Germany and the feeling of powerlessness that went with it had a big impact on her. She mentions, sometimes, that she witnessed one economic collapse and she doesn’t want to experience another one.
Hickley: And yet she nearly let Greece leave the euro and risked the unraveling of the whole project. Was her decision to keep Greece on board whatever the cost purely pragmatic?
Czuczka: She has said as much publicly: There was a weighing of pros and cons, risks and rewards, and she came to the conclusion that it was too risky to let Greece go. Caution is her defining trait.
Hickley: Helmut Kohl, the chancellor who promoted her, had an idealistic vision of a united Europe that stemmed from youthful memories of war. Does Merkel have a European vision?
Crawford: Merkel has evolved. She has developed a European vision through the crisis. That’s why she is in this position now -- the second most powerful politician in the world after Barack Obama.
Hickley: Your book shows that the Obama administration was following events in Europe very closely, and earlier than previously realized.
Czuczka: What we know as the European debt crisis is an extension of the subprime crisis in the U.S. The U.S. was already sensitized. It very quickly became a clash over the remedy.
Crawford: The U.S. couldn’t do anything more than berate the Europeans, particularly the Germans. George Papaconstantinou, who was the Greek finance minister at the time, told us that he was getting calls every week from the U.S. Treasury saying “when are you going to get this bailout?” And he said “it’s not up to us! We don’t know!”
Hickley: Merkel’s leadership has been criticized in Europe and further afield, yet she still tops popularity polls in Germany. How has she taken the public with her?
Czuczka: She has found the balance that the Germans like. She has taken it slowly, and thereby addressed German insecurities. The Germans want to be good Europeans, while, understandably, not paying all the bills. And that has been her policy.
Crawford: Anton Boerner, the head of the exporters’ association, said it best -- he said Merkel takes the angst away from Germans. By being cautious, pragmatic, unemotional and logical.
Hickley: So is she going to win re-election on Sept. 22?
Crawford: It’s hard to see beyond her. I would bet on her being the next chancellor.
Czuczka: No polls suggest a mood for change in Germany. She is very popular. She can tell Germans “I have gotten you through the euro crisis.”
Hickley: Will she be remembered as the great prevaricator, or the great savior of the euro?
Crawford: The jury is still out. The next year will tell, if unemployment starts to fall in Spain and Greece. She is treading a very fine line.
“Angela Merkel: A Chancellorship Forged in Crisis” is published by Wiley Press, priced at 19.99 pounds in the U.K. and $29.95 in the U.S. To purchase the book, click here or here for North America.
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