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| With the German structured walls of the eurozone showing signs of cracking, it seems that the castle that austerity built is well and truly under siege. (file photo) |
A European backlash against austerity could force Germany to adjust its savings-first approach to the debt crisis, although political tumult and economic decline will still test the ability of euro zone leaders to hold their currency bloc together.
The strong performance of Socialist Francois Hollande in the first round of the French presidential election and the Dutch government's collapse in a row over budget cuts this week, highlight the risks of a rebellion against Berlin's hardline emphasis on cutting deficits.
Should Hollande beat incumbent Nicolas Sarkozy in a runoff on May 6 and Chancellor Angela Merkel's conservatives lose an important regional election a week later, pressure on the German leader to explore more growth-friendly policies will rise.
However, the options for achieving growth in recession-mired southern European economies such as Greece are extremely limited, people close to the German leader concede.
By pushing up French and Dutch bond yields this week, financial markets have made clear they will punish countries that stray from the consolidation course, leaving Europe little choice but to grind it out and hope the bloc's increasingly brittle policy consensus holds.
"No one in Europe has the money for big stimulus programmes, no one can afford higher deficits," Peter Altmaier, parliamentary whip for Merkel's Christian Democrats (CDU), told reporters on Tuesday.
"And therefore growth must be achieved via other means like structural reforms. This is recognised across Europe."
That does not mean Berlin can avoid making some concessions to political forces across Europe who want a shift in strategy.
HUGE DYNAMIC
Merkel's main political rivals at home, the centre-left Social Democrats (SPD), are threatening to deny her the two-thirds majority in parliament she needs to pass the EU's "fiscal compact", a charter that would set tough budget rules in stone.
Like Hollande, the SPD wants a growth component added to the pact, and the party is in a strong position to scupper Merkel's plan to ram it through the Bundestag lower house next month.
Victory in an election in the big German state of North Rhine-Westphalia on May 13 could embolden the SPD to take a more confrontational approach with Merkel.
Among the party's demands are a financial markets tax to fund investment in the euro zone's reeling periphery, more flexible use of EU structural funds, so-called "project bonds" and more lending power for the European Investment Bank.
Ulrike Guerot, who runs the Berlin office of the European Council on Foreign Relations, believes that if Hollande defeats Sarkozy next month and bands together with the SPD, they could force Merkel to adjust her austerity-first approach.
"If Hollande can get the choreography right, if he can get a large group of countries behind him and not turn this into an open confrontation with Merkel, I could imagine a huge dynamic for pro-growth policies," she said.
Signs that economic gloom elsewhere in Europe is hitting Germany could also affect Berlin's approach to the crisis.
With Chinese Premier Wen Jiabao visiting a trade fair in Hanover this week, the focus has been on the German economy's increasing reliance on China.
But exports to China make up only 7 percent of Germany's annual total, compared with 40 percent to the euro zone, leaving it highly dependent on the health of its neighbours - particularly France and the Netherlands.
"You could see economic weakness in other parts of the euro zone begin to drag on Germany," Peter Bofinger, a member of the German government's "wisemen" council of economic advisers, told Reuters. "It's foolish to pretend that Germany is immune to what happens elsewhere in Europe."
Trade data have already pointed to a slowdown in German exports to its euro zone partners. A survey of purchasing managers on Monday showed the German manufacturing sector shrinking at its fastest pace in nearly three years, partly because of weak sales to southern Europe.
Merkel, who faces a federal election next year, is unlikely to give up her trump card - the robust German economy - without a fight.
GREECE, IRELAND, NETHERLANDS
Still, the lack of workable options for boosting growth in Europe means the currency bloc is in for a rocky ride.
Perhaps the biggest political hurdle is an election in Greece on the same day France holds its runoff.
Opinion polls suggest the parties behind the current technocrat-led government in Athens - the conservative New Democracy and socialist Pasok - could win enough seats to form a government.
However, coalition talks are likely to be long and difficult regardless of the result.
Fringe parties that have benefited from growing anger with the government's austerity-for-aid policies could also deliver a surprise, calling into question Greek support for the cuts mandated under its bailouts.
In Ireland, a referendum on the budget discipline pact scheduled for May 31 could inject more political uncertainty into crisis resolution efforts. And a strong showing by eurosceptic Freedom Party leader Geert Wilders in a snap Dutch election would be a major risk for the bloc.
Notwithstanding recent agreements to boost the financial firepower of Europe's rescue funds and the International Monetary Fund, political turmoil could eat away at investors' confidence, increasing risks to big euro zone economies such as Spain and Italy, and rekindling fears of a breakup. (Reuters)
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http://www.athensnews.gr/portal/8/55148
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| Tsipras sees New Democracy and Pasok running scared |
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 | 24 Apr 2012 |
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| The two main political parties of Greece are running scared according to Alexis Tsipras but they will not escape the result of the May 6 elections. (file photo) |
The two main parties were reluctant to face the other party leaders in a face-to-face political debate because they both had precisely the same policy platform, comprised of the dictates of the second memorandum translated into Greek, Coalition of the Radical Left (Syriza) Parliamentary group leader Alexis Tsipras said on Tuesday.
Pasok leader Evangelos Venizelos and main opposition New Democracy leader Antonis Samaras had "signed for the impoverishment of the Greeks, signed for the concession of national sovereignty," Tsipras stressed during a tour of the Athens district of Kaisariani.
For this reason, the two main parties were seeking to organise a debate with only the two of them, which would in reality be a parallel monologue on a shared political programme, he said.
"The days when they could fool people with tricks are gone, never to return. On May 6 they will get their answer," Tsipras added. (AMNA)
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http://www.athensnews.gr/portal/8/55154
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| No deal with New Democracy, Venizelos states |
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| 24 Apr 2012 |
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| No deal has been signed and none are on the proverbial table between New Democracy and Pasok according to Evangelos Venizelos. (file photo) |
Pasok leader Evangelos Venizelos on Tuesday denied that his party and main opposition New Democracy had already struck a deal for cooperation after the elections, regardless of the election outcome.
He was speaking during a press conference for media in the Peloponnese.
Venizelos pointed out that the stance currently adopted by New Democracy leader Antonis Samaras, essentially precluded any such development and Samaras was "self-excluding himself from the discussion on the country's future".
According to Pasok's leader, the two parties had directly conflicting strategies and beliefs and he said that the country would be "ungovernable" if current opinion poll forecasts translated into votes, stressing the need for a "clear mandate". (AMNA)
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Ex-PM backs Samaras
In first public statement in 2.5 years, Karamanlis calls for voters to back ND leader
In his first public statement in two-and-half years, former conservative Prime Minister Costas Karamanlis on Tuesday appealed to center-right voters to back New Democracy leader Antonis Samaras in upcoming snap elections describing him as the only choice for political stability.
In a written statement, Karamanlis noted that the “necessary prerequisite for political and governmental stability is the reinforcement of New Democracy and Antonis Samaras.” “The greater the support they receive, the stronger the hope that we can emerge from the crisis without an even greater cost,” Karamanlis wrote.
Samaras was clearly buoyed by the support, claiming to have “maintained an excellent relationship with Mr. Karamanlis, a relationship of depth, duration and with future.”
Karamanlis’ statement was his first public intervention since November 2009, a month after the conservatives suffered a crushing defeat to socialist PASOK, when he launched the process for his replacement as ND leader at a party conference. The former premier also sent a written response to a parliamentary committee probing the Vatopedi land swap affair since then, but nothing else.
Karamanlis had been planning to make a public expression of support for Samaras for several days, sources told Kathimerini. He is running as a candidate in Thessaloniki where, as a former prime minister, he is guaranteed a seat.
Meanwhile ND unveiled its state list of candidates, topped by the head of the national association of judges and prosecutors, Haralambos Athanassiou. The choice of Athanassiou was warmly received by many in the ranks of ND who regard it as signalling an effort to clean up corruption in public life. Samaras described the state list -- which comprises candidates who are not directly elected but gain seats in Parliament in proportion to the share of the vote their party secures -- as one that ”rewards merit, distinction and moral values.” ”We are sending out this message to all, the message that, despite the adversities, despite he problems left behind by PASOK, Greece is a rich country that can make it and will make it,” Samaras said.
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