For months, Merkel has been anguishing over how to tackle the Greek problem. After five years of bailouts, the problem is nowhere near fixed and – if anything – worse. Yet she may have herself to blame for vacillating over the issue.
When the Greek crisis hit in 2010, Merkel insisted on bringing in the International Monetary Fund (IMF) as part of the troika that included the Eurozone states and the European Central Bank (ECB). There was no clear lead authority. Merkel did this against the advice of her finance minister Wolfgang Schäuble, who has long argued that the EU should solve its own problems. This was the first mistake.
As a result, the three institutions put together a scratch package of bailouts and demands that have created chaos. Traditionally, in previous country bailouts, the IMF would have been the lead agency. The troika have pursued a series of mini bailouts with conflicting demands, when – many argue – a managed exit from the euro would have been the better course of action.
Clash of Cultures
Merkel’s next mistake was a cultural one. When she came to power, Germany was in the grip of economic crisis: high unemployment and a tax and welfare regime that was in need of reform. She set about doing this and her austerity package worked.
- Nai (Yes). Exiting the Euro would help the Greek economy 88.1% (1544)
- Oxi (No). It would be an economic disaster 11.7% (204)
One the one hand, she was demanding a stricter package of reforms, based on her own Germanic experience, which would inevitably cripple Greece. While on the other hand, she was determined not to let Greece leave the euro and damage the great European dream.
Half of her was Merkel — the pragmatic economist, the other was Merkel — the great European. She has now discovered, in her vacillation, she has not shown the leadership expected of the most powerful woman in the European Union.