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The World According to Angela Merkel

Leonid Bershidsky is a Bloomberg View columnist. He was the founding editor of the Russian business daily Vedomosti and founded the opinion website Slon.ru.
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It's hard to be Germany these days. In a world that is growing fiercely divided after two decades of middle-of-the-road orthodoxy, Chancellor Angela Merkel's government and the country it represents increasingly seem like the world's last bastion of common sense. But Germany's rejection of emotion and every kind of extreme have proven a powerful irritant. Paradoxically, the more Germany strives to pursue the middle path, the more often it is reminded of its Nazi-era crimes.

Germany is now fighting on two fronts at the same time: foreign policy, where Merkel has been pushed forward by other Western leaders as the chief negotiator with Russian President Vladimir Putin, and economics, where Greece has challenged the bailout system for bankrupt European nations that Germany has painstakingly built over the past three years. In both these developing sagas, Berlin has been fiercely criticized by radical adversaries, but has stubbornly persevered.

In the Ukraine crisis, Merkel's stand has always appeared ambiguous. Initially, she was a skeptic of economic sanctions against Russia, diluting a U.S. campaign to inflict costs on Putin for the annexation of Crimea. That changed after Malaysia Airlines Flight 17 was downed over eastern Ukraine: Merkel became an advocate of sanctions as a long-term strategy to weaken Putin's regime. As Putin stepped up support for Ukraine's separatist rebels -- and lied to Merkel's face about it -- the chancellor wouldn't rule out strengthening the sanctions, and her special relationship with the Russian president grew more perfunctory. Now, energized by U.S. calls for arming Ukraine, which she sees as dangerous, Merkel is again willing to discuss a peace deal with Putin. She has even flown to Moscow for talks, which suggests she may be prepared to accept some of his territorial and political demands to achieve a lasting cease-fire. 

On the surface, Merkel's actions appear to reflect an inner conflict between her strong values, which Putin has repeatedly trampled on, and her no-nonsense practicality, which calls for a compromise to end the fighting on European Union borders. No wonder she has been getting flak from both from Russia and from the U.S., her critics indulging in cheap shots by referencing Germany's Nazi past. In the Russian parliament, ultranationalist deputies have been demanding compensation from Germany for World War II damages to Russia. U.S. Senator John McCain accused Merkel of pursuing the kind of appeasement that allowed Adolf Hitler to make advances in Europe in the late 1930's. "History shows us that dictators will always take more if you let them,” Senator McCain was quoted as saying in Munich last weekend. "They will not be dissuaded from their brutal behavior when you fly to meet them to Moscow -- just as leaders once flew to this city."

Merkel's seeming inconsistency, however, is tactical rather than strategic. She has stubbornly been searching for the least costly solution for Europe, one that drives a path between Moscow's Scylla and Washington's Charybdis. She is as far from embracing Putin's ambitions to recreate some version of the Soviet Union as she is from endorsing remote U.S. warmongering. She is the only Western leader capable of telling Ukrainian President Petro Poroshenko that he cannot win a war against Russia, no matter what weapons he might get from the U.S. "I cannot imagine any situation in which improved equipment for the Ukrainian army leads to President Putin being so impressed that he believes he will lose militarily,” she said at the security conference in Munich, looking Poroshenko in the eyes. “I have to put it that bluntly.”

German Foreign Minister Frank-Walter Steinmeier spoke for Merkel and her entire government when he explained, also at the Munich conference last weekend, that Germany's common-sense stand was not "a form of cowardice or a fact that we're oblivious of our past and our history." "We know the region, and this is why we're so persistent and persevering, despite some disappointment," Steinmeier added.

Germany has shown the same stubbornness in dealing with the Greek challenge. Finance minister Wolfgang Schaeuble gave up no ground in talks with his Greek colleague Yanis Varoufakis in Berlin last week, insisting Greece should stick to the terms of its EU-led bailout. In response, Greek Prime Minister Alexis Tsipras last night renewed his pledge to seek compensation from Germany for its wartime crimes. "I cannot overlook what is an ethical duty, a duty to history," he told his country's parliament in an emotional speech that was full of references to "blackmail" and "lectures " -- all barbs directed at Germany, which, as Greece's main creditor, has been unwilling to provide debt relief.

Germany's stubbornness is a matter of values. Last year -- a year ahead of schedule -- the country balanced its budget for the first time in more than 40 years. The country had rising tax revenues and falling unemployment (the jobless rate now stands at 6.5 percent, down from 6.9 percent at the end of 2013), despite almost zero economic growth. Germany's fiscal responsibility is an example to its neighbors which they would rather ignore, because following it would require hard work. 

Germany, however, has been willing to accept practical compromises in economic matters, too. It gave in to calls for European Central Bank quantitative easing, for example. (And it will likely benefit most from the policy, in any case -- while other European governments use the lax monetary policy to buy more time to avoid reforming their bureaucracy-clogged economies, the weaker euro will make German exports more competitive.) Merkel will probably end up accepting some kind of compromise with Greece, too, to preserve euro area unity.

Germany's approach to crisis management isn't a mystery. It starts off by asserting and defending its conservative, perhaps somewhat outdated values until that policy hits a dead end. Then, it works hard on a compromise solution that departs from these values in small ways but allows for a consensus that discourages radical posturing. The values are important for anchoring expectations in subsequent negotiations. They are not, however, rigid ideological dogmas worth fighting for to the exclusion of common sense.

This is an emerging leadership style that's very different from Washington's unabashed hegemony-seeking or Moscow's anything-goes opportunism. If Merkel proves that it works by engineering solutions in both Ukraine and Greece, Germany will emerge as a new center of power capable keeping the world's radical impulses in check. 

But there's no guarantee Merkel will succeed. Steinmeier suspects that his country may have come to this junction too soon, pointing out in Munich that Germany was "put to the test much sooner and much more severely than we could have fathomed last year." If Germany fails in either Ukraine or Greece in the weeks ahead, it will have to rethink its international responsibilities. According to Steinmeier, 70 percent of Germans never wanted an expanded role in the first place.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Leonid Bershidsky at lbershidsky@bloomberg.net

To contact the editor on this story:
Cameron Abadi at cabadi2@bloomberg.net