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Merkel Backs U.S. Trade Deal Saying EU Ready to Shun Putin

Merkel Backs U.S. Trade Deal
German Chancellor Angela Merkel addresses the opening of the industrial trade fair in Hanover. Photographer: Johannes Eisele/AFP/Getty Images

April 7 (Bloomberg) -- German Chancellor Angela Merkel stepped up her support for a trans-Atlantic trade deal one day after saying that Europe shouldn’t fear the cost of imposing economic sanctions on Russia.

Merkel, in a speech opening the Hanover fair yesterday, said there’s a need for renewed momentum to kick start free-trade talks between the European Union and the U.S. A fresh push is needed to create a common trading zone of 800 million people and it would be “an irony of world history” if the talks were to fail, she said.

“Sure, we hold our standards dear, and so do the Americans,” she said. “But we should give ourselves a push so that, without giving up on standards, we bring together what belongs together.”

As the leader of Europe’s biggest economy and Russia’s largest EU trading partner, Merkel’s stance is key to reaching a trans-Atlantic trade deal and will guide Europe’s ability to maintain a united response to Russia’s annexation of Crimea.

Addressing a national convention of her Christian Democratic Union party on April 5, the chancellor combined her offer to “keep talking” to President Vladimir Putin with the message that he shouldn’t underestimate European resolve to enact economic sanctions if Russia “violates Ukraine further.”

“Nobody should harbor any illusion,” she said in the speech to party delegates in Berlin. “As different as we are in Europe, it’s our good fortune to be united and we will unite to make that decision.”

Merkel, whose stance has won the backing of German industry while riling some company executives, is boosting her domestic standing as Germans see her reprising her role during the sovereign-debt crisis of Europe’s pivotal player.

‘Smart Strategy’

As during the debt turmoil that dominated her second term, her approach to the Ukraine crisis at the start of her third is a delicate balancing act. Merkel’s approval rating rose for the third consecutive month to 72 percent in an ARD television poll published April 3. The same poll suggested that most Germans want to avoid conflict with Russia.

Merkel is pursuing “a dual approach with a smart strategy behind it,” Carsten Nickel, senior vice president at Teneo Intelligence in London, said by phone. “She is reproaching Putin and backing sanctions to the full, while at the same time keeping open communication.” At the current juncture, with the options limited, “it’s the rational thing to do,” he said.

While Merkel said in her speech that “the strong can’t be above the law,” Germany is hemmed in by business ties with Russia, its third-biggest trade partner outside Europe after the U.S. and China and the supplier of about a third of its natural gas.

Air Patrols

Germans’ reluctance to take on Putin was underscored in the ARD poll, with 53 percent of respondents opposing increased North Atlantic Treaty Organization air patrols over eastern Europe and 61 percent saying German warplanes should stay out of such action. The March 31-April 2 poll of 1,006 people has a margin of error of as many as 3.1 percentage points.

Merkel said on March 14 that the economic impact of sanctions on Germany would be limited. Ulrich Grillo, president of Germany’s BDI industry federation, said at the same event in Munich that while sanctions would have fallout, “we have to respect” international law.

Russia’s trade volume of 76 billion euros ($104 billion) compares with a combined 602 billion euros in German trade with France, the Netherlands, China and the U.S., its four biggest partners, according to the Federal Statistics Office.

European Union leaders agreed on March 17 to impose sanctions on 21 individuals after the referendum in Crimea that paved the way for Putin to annex the region from Ukraine. European leaders and President Barack Obama warned at the time that Russia would face added sanctions, including possibly on energy assets, if it moved deeper into Ukraine.

Merkel “is telling Putin, ‘Don’t underestimate the decisiveness and unity of Europe’s response,” Norbert Roettgen, a CDU member of parliament who heads the German lower house’s foreign affairs committee, said in an interview. “Europe will meet and match this challenge.

To contact the reporters on this story: Brian Parkin in Berlin at bparkin@bloomberg.net; Arne Delfs in Berlin at adelfs@bloomberg.net

To contact the editors responsible for this story: Alan Crawford at acrawford6@bloomberg.net Tony Czuczka

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