Merkel in Peril With Window to Tame EU's Refugee Crisis Closing

TOPSHOT-SERBIA-EUROPE-MIGRANTS

Refugees walk through snow covered fields, after crossing the Macedonian border into Serbia near the village of Miratovac, on Monday.

Photographer: Dimitar Dilkoff/AFP/Getty Images
  • Chancellor faces unprecedented pressure from her faction
  • Schaeuble remains at her side; Merkel holds economic trumpcard

Angela Merkel is running out of time and allies who’ll help her find a solution to Europe’s refugee crisis.

QuickTake Angela Merkel

The net drew tighter this week as Germany’s southern neighbor Austria announced plans to impose an upper limit on refugees, and President Joachim Gauck suggested Germany may need to follow suit to maintain social order. To the north, once-open Sweden is already tightening border controls, while European Union states to the east of Germany are refusing point blank to take asylum seekers.

Everywhere she turns, the German chancellor is running into resistance to the open-door refugee policy that’s morphed into her biggest crisis yet. That’s left the leader of Europe’s biggest economic power pleading for breathing space in places such as Bavaria, the region where most asylum seekers arrive, and home to some of her fiercest critics.

“This can’t go on forever,” Carsten Nickel, a political-risk analyst at Teneo Intelligence in Brussels, said by phone. “After the political flashes over the last weeks and months, it’s going to be difficult to go through another summer with these kinds of arrivals.”

Angela Merkel speaks in Wildbad Kreuth on Jan. 20, 2016 . Photographer: Pepter Kneffel/AFP/Getty Images
Angela Merkel speaks in Wildbad Kreuth on Jan. 20, 2016 . Photographer: Pepter Kneffel/AFP/Getty Images

With her hold on the chancellery openly questioned as rebels in her coalition threaten her standing, Merkel signaled Wednesday that she’ll give diplomacy one more month. That timeline consists of planned talks with Turkish leaders in Berlin on Friday, an international conference on aid for Syrian refugees in London in early February and a summit of EU leaders starting Feb. 18, where alongside Britain’s future in the bloc, the refugee crisis “must play a central role,” Merkel said.

Cajoling Turkey

Having so far failed to recruit fellow European leaders to share Germany’s burden, Merkel has given up on a resettlement accord with the other 27 EU governments and is instead pursuing a coalition of the willing, according to a person familiar with her strategy who asked not to be identified because the negotiations are private. Cajoling Turkey to stem the flow of migrants crossing the country and to take back some refugees is key to her plans, the person said.

“Of course Germany will make its position known,” Merkel told reporters at the Alpine retreat of Wildbad Kreuth before defending her policy in front of the Christian Social Union, her Bavarian sister party, for the second time in two weeks. “After that we can make a preliminary assessment and see where we stand.”

Dutch Prime Minister Mark Rutte, speaking at the World Economic Forum in Davos on Thursday, gave a timeframe of two months at most to get the refugee numbers under control. “We need to get a grip on this issue in the next six-to-eight weeks,” he said. “When spring comes the numbers will quadruple, or at least go up significantly.”

Standing Firm

As public support for Merkel and her party bloc slides, the chancellor who once lived behind the Berlin Wall is standing firm, saying she won’t be the one to start reversing passport-free travel and commerce in Europe, a central achievement on a continent that started two world wars last century. Since sexual assaults on women in Cologne and other German cities on New Year’s Eve, that stance has become even more difficult.

For all her woes, Merkel has no apparent successor or challenger in her party, and the man most often touted as a potential heir, Finance Minister Wolfgang Schaeuble, was notable in rising to her defense last week. He accompanied her to Bavaria on Wednesday.

Economic Backbone

She holds another trump card: the German economy. With a steady labor market and record-low unemployment, Germans have money in their pockets and are increasingly willing to spend it. The Finance Ministry announced a 2015 budget surplus this month of 12.1 billion euros, more than double the prior estimate, and said a balanced budget this year is still possible despite costs tied to refugees.

A poll released Thursday suggested a slim majority of voters, 52 percent, support keeping the border open to refugees. Forty percent want it shut, according to the Jan. 18-19 TNS Emnid poll for Focus magazine.

Merkel has seen worse approval ratings, and has committed dramatic U-turns before without any lasting damage -- take her previous support for nuclear power. She’s still a long way from reversing her stance this time, pushing back in a speech to a business audience in Freiburg last week when she pointed out that nations near Syria have taken in many more refugees from the country’s civil war. “If a continent like Europe with 500 million people is not capable of taking in one million Syrians, perhaps temporarily, then that is not in line with our values,” she said.

Her effort to press Turkey into helping halt the flow of migrants crossing the Aegean Sea to Greece takes center-stage on Friday when Merkel and Turkish Prime Minister Ahmet Davutogluare scheduled to meet in Berlin. On the agenda are pledges agreed between the Turkish government and the EU in December, including 3 billion euros ($3.3 billion) in aid for Turkey.

For Merkel’s growing number of critics, that gradual approach is too slow after 1.1 million asylum seekers arrived in Germany last year. Germany’s president chimed in with a speech in Davos Wednesday warning that limits on migration may be exactly what’s “morally and politically” necessary to avoid overburdening native populations.

‘Completely Vindicated’

Gauck’s warning and Austria’s decision the same day to limit the number of refugees it’ll take in this year emboldened Bavarian Premier Horst Seehofer, a key Merkel antagonist. He later expressed frustration that the chancellor hadn’t moved on the issue.

“My patience is at an end,” Seehofer told reporters in Kreuth, adding that the dispute will affect the work of Merkel’s coalition in Berlin. “The coming weeks and months will be especially difficult.”

While it’s the smallest party in Merkel’s three-way coalition, the Bavarian CSU has been unapologetic about pressing the chancellor who two years ago posted the biggest election victory since East and West Germany reunified. Yet she can rely on the support of her Social Democratic Party coalition partner and the opposition for the broad thrust of her refugees policy, paradoxically limiting the rebellion to a minority of her own bloc.

Caucus Revolt

The unrest in Merkel’s faction was given voice this week as almost 50 lawmakers from her Christian Democratic Union signed a letter calling on the government to tighten border security to help limit the influx. Along with the 56 CSU delegates who already aired their disapproval, that’s about a third of Merkel’s 310-member caucus in the lower house, according to CDU lawmaker Christian von Stetten, one of the rebels.

Even so, “this is not an appeal against the chancellor,” he said Tuesday by phone, “but rather an expression of an alternative view of the issue at hand.”

That alone suggests Merkel isn’t going to be leaving the chancellery anytime soon.

After 10 years in office, the chancellor “is a wily political operator with no obvious rival from her own party or the opposition,” said Holger Schmieding, chief economist at Berenberg Bank in London. “Even those within her own party who disagree with her probably believe that toppling Merkel could hurt the centre-right in future elections even more so than the current migrant crisis.”

Before it's here, it's on the Bloomberg Terminal. LEARN MORE