Merkel Bets Austerity Will Result in Re-Election

Spiegel
February 22, 2012

German voters value austerity. That, at least, is what Chancellor Angela Merkel is betting on as she embarks on a new package of savings measures aimed at balancing the budget in two years. She wants to show the rest of Europe how it's done -- and get re-elected in the process.

Angela Merkel and her fellow conservative Finance Minister Wolfgang Schäuble like to play the role of teachers when dealing with their partners from the euro zone. There is hardly a European Council session in which the German chancellor doesn't preach the benefits of austerity ("solid budgets and growth are not mutually exclusive"), and hardly a meeting of finance ministers goes by without Schäuble pointing out that some countries still have homework to do when it comes to their national finances.

The admonitions, coupled with the subtle message that Germany's budget looks exemplary by comparison, have earned the two politicians a reputation for being patronizing.

Just how healthy German finances are was revealed at the beginning of last week, in the form of an early-warning report by the European Commission. Germany was the only large country to be given an almost perfect grade.

And yet, if Merkel and Schäuble have their way, the country many in Europe already see as a model of sound budget management will become even more exemplary. "We cannot expect Greece and the other crisis-stricken countries to accept more and more austerity measures, while nothing changes in Germany," says a close associate of the chancellor.

As such, Merkel and Schäuble want to significantly ratchet up consolidation efforts. The 2013 budget, currently being prepared at the Finance Ministry, will include many billions in savings. In addition, the last stage of the so-called debt brake -- Germany's constitutionally anchored law regulating state borrowing -- will be brought forward by two years instead of going into effect as planned in 2016. Measures under discussion include cuts in social benefits and a reduction in government services. Merkel and Schäuble believe that Germany can only remain credible in the euro crisis by demonstrating that it is not simply reaping the benefits of past efforts. Germany wants to lead by example.

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