Merkel Warns Change of Crisis Course Would Crush Recovery

Chancellor Angela Merkel laid down a marker for Sunday’s televised election debate with a warning that shoots of economic recovery risk being uprooted unless Germany sticks with her prescription for the euro-area crisis.

Merkel, addressing a campaign rally in the western town of Minden late yesterday, said that voters face a choice in the Sept. 22 ballot between “very different concepts” of how to overcome the crisis that emerged in Greece in late 2009. At its core is too much debt and too little competitiveness, and “that must change,” she said.

The chancellor and her Social Democratic challenger Peer Steinbrueck are honing their stances on the debt crisis as they prepare for the Sept. 1 debate. With polls showing the SPD trailing Merkel’s Christian Democratic bloc by 14-19 percentage points and both candidates coming out today against military engagement in Syria, the onus is on Steinbrueck to sway voters if he is to take over the helm of Europe’s biggest economy.

“Steinbrueck will try to find a weak point to attack Merkel, but even on the core Social Democratic terrain of social justice Merkel can point to record low unemployment,” Joachim Trebbe, a professor of media analysis at the Free University in Berlin, said in a telephone interview. “That’s a crucial plus for her and her party.”

Merkel, who routinely omits to mention Steinbrueck by name during her campaign rallies, has prepared thoroughly in advance of the debate, according to a person familiar with her tactics who spoke on condition of anonymity. She is ready to confront Steinbrueck over her handling of the euro-area crisis, the person said.

TV Rehearsals

Steinbrueck rehearsed his performance in a professional television studio over two days in the middle of this month, Spiegel Online reported.

Both sides have agreed to the discussion fields “labor and social matters,” “security” and “money and finances.” Steinbrueck will have the first word and she will have the last.

Merkel’s crisis course received a fillip today as figures showed economic confidence in the 17-nation euro region rising to a two-year high in August. That adds to German economic growth of 0.7 percent in the second quarter that helped haul the bloc out of its longest-ever recession and unemployment of 6.8 percent, near a two-decade low even after an increase in August.

The German-led path of aid in return for reforms and debt cuts “is showing the first signs of success,” Merkel said yesterday. “But if we go about it wrongly then this success can be destroyed.”

Crisis Crucible

Germany’s crisis policy has become the crucible in which the election may be decided, as Steinbrueck and Merkel trade barbs over its impact on Europe. Steinbrueck says Finance Minister Wolfgang Schaeuble’s remarks last week that Greece will need more aid shows Merkel’s strategy isn’t working and needs to be recalibrated to focus on bolstering jobs and growth.

Steinbrueck promised a change of course to policies of “content” rather than “nothing” yesterday, as he laid out his priorities for the first 100 days in office if he were to become chancellor. They include a flat-rate minimum hourly wage of 8.50 euros ($11.28), reform of the pensions system and equal pay for men and women working in the same job.

Germany under Merkel “is at a standstill,” Steinbrueck told reporters in Berlin. “No-one knows where this coalition wants to take Germany or Europe.”

Merkel says her approach of offering conditional aid is yielding results, and rejects opposition proposals to pool euro-area debt.

German Solidarity

“That’s why we don’t want euro bonds or a common redemption fund but say everyone must make an effort and then they will get help from us for a certain time,” Merkel said. “Germany has and does show solidarity. But I’ve always followed the path with my colleagues in the Bundestag and with my caucus that says solidarity and help is one side of the coin and self-help, self-responsibility and self-improvement is the other.”

Support for Merkel’s Christian Democratic Union and its Bavarian sister party, the Christian Social Union, dropped a percentage point to 41 percent in an Infratest poll yesterday, while her Free Democratic coalition partner held at 5 percent. Their combined tally of 46 percent would probably be enough for a rerun of the current coalition if repeated on Election Day.

Steinbrueck’s SPD gained two points to 26 percent while its Green party ally dropped a point to 11 percent. The Left Party had 8 percent, down one point. Infratest polled 1,500 voters on Aug. 27-28. No margin of error was given.

On Syria, Steinbrueck today aligned the Social Democrats behind the U.K. Parliament, which voted late yesterday against military action. Syria was effectively removed as an election topic after Merkel’s chief spokesman, Steffen Seibert, told reporters that German military participation wasn’t being considered nor had it been sought.

“In terms of big issue politics -- the handling of the debt crisis and now Syria -- Merkel and Steinbrueck are not sufficiently far apart for the debate Sunday to make a difference,” said Trebbe of the Free University. With the polls firming up, it shows “there’s little appetite for a change of government,” he said. “That’s a terrific advantage for Merkel on Sunday.”

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