Hint: It's not Facebook's COO Sheryl Sandberg. She lives in Berlin and is key to solving the euro crisis.
- By Jeffrey GedminJeffrey Gedmin is President and CEO of the Legatum Institute
She’s not a billionaire, social media celebrity, or bestselling author. In an era of über-bling, she’s distinctly unter-bling. By her own admission, she was a bit of a klutz as a young woman. But Angela Merkel, Germany’s chancellor for the last 8 years, has quietly become the most powerful woman in the world.
I spent a day with Frau Merkel in spring 2005, sitting at a picnic table under a tree in a quiet, rural setting an hour and a half outside Berlin. At the time, Merkel was chairman of the Christian Democratic Union (CDU) and campaigning against Social Democratic Chancellor Gerhard Schroeder. She had phoned me weeks earlier — I was then the head of the Aspen Institute Berlin — to invite me to join several other foreign-policy experts for a discussion about Germany, Europe, and the world.
I got first-hand exposure not just to Merkel the politician, but also to Merkel the scientist — a chance to see how her mind works. I think her background tells us a good deal about her approach to problem solving. And perhaps, ultimately, how I hope she will tackle the euro crisis.
Merkel is a physicist by training, and the first thing you observe about her is that she’s not a pontificator. She’s a careful and patient collector of data. She loves due diligence and wants a complete picture before she reaches conclusions. It’s a rare thing in politics and public policy, where we all have our biases and pre-conceived notions. One thing’s for certain: Not too many politicians author doctoral dissertations with titles like, "Examination of the Mechanism of Decomposition Reactions with Simple Bond Breaking and the Calculation of their Rate Constants on the Basis of Quantum-Chemical and Statistical Methods." Merkel’s husband, by the way, is a quantum chemist and professor who, like the chancellor herself, grew up in East Germany.
It became clear that day at our little lakeside seminar that Merkel was there to gather information. She’s empirical and deliberative. It was as if she wanted to place each piece of analysis and every single policy recommendation under a microscope.
I witnessed this same methodology on other occasions. I once brokered a conversation between Merkel and Benjamin Netanyahu in Berlin, at a time when Bibi was between stints as Israel’s prime minister. What did Merkel think about the Israeli-Palestinian peace process, about the security wall, Gaza, Egypt, or Iran? You would hardly have known during the course of the 90 minute conversation. She just peppered her guest with questions, assembling her dataset.
I think Merkel’s scientific approach is an immense advantage. Now comes the rub.
The eurozone is falling apart. The economics are finally catching up to the politics. It is fast becoming a matter of simple arithmetic. Have a look at the CEP Default Index, an interesting tool for tracking creditworthiness produced by the Centre for European Policy in Freiburg. The gap between fiscally disciplined and solvent countries on the one hand, and those mired in debt on the other, is growing ever wider. Unless things change dramatically, you won’t be able to keep all of Europe in the same common currency.
CEP chairman Lüder Gerken sums up the problem this way: "We give the Greeks the money they need and tell them to reform. When they don’t reform, we give them more money." Meanwhile, Greeks don’t tire of German bailouts; they do, however, become dreadfully resentful of being told by Germans what to do. On Merkel’s last trip to Athens, hundreds of thousands of protestors carried banners likening the German leader to Hitler and denouncing the new Fourth Reich.
For their own reasons, the French are getting testy, too.
With its economy in freefall, France is fed up with President François Hollande, whose standing continues to plummet — a mere 30 percent popularity after less than a year in office. That’s a record. The French have also had enough of German lectures on the virtues of austerity. Look for Franco-German tensions to grow worse, and for populist sentiment in France, as well as elsewhere across Europe, to increase.
The inescapable facts are these: 1) There is no way the eurozone can hang together if it means endless German bailouts for countries that are unwilling or incapable of getting their public finances in order; and 2) there is no way Europe can have a stable and prosperous future if the French economy remains chronically ill and confidence between Paris and Berlin deteriorates.
The latest bad news from euro-land has been the banking debacle in Cyprus. Another crisis, another "unique" case, another precedent. Spain’s time will come: another unique case.
What’s needed? It’s not the fanciful dreams of Tory backbenchers. European integration of some sort is here to stay because most Europeans want it. What is needed, however, is flexibility, pragmatism, and a clear-eyed, orderly plan for a multi-speed Europe. What this requires is a new vision for Europe that includes allowing Greece and possibly other countries to exit the euro, a process that unavoidably entails serious financial and political costs. Avoiding short-term pain, though, means flirting with long-term meltdown and disaster.
What Europe needs is imagination and leadership from Germany, the country with the biggest and healthiest economy. But there’s another aspect to the person of Angela Merkel — who’s almost certain to be chancellor again after September elections — that makes Europe’s rescue difficult.
Like her mentor Helmut Kohl, and like virtually everyone else in the political establishment in Berlin, Merkel has been wedded to the position, up until now, that a single currency leading to a United States of Europe is the only real guarantee of peace and prosperity for Germany and its neighbors. Anything less, most elites in Berlin believe, will lead to a return of nationalism, destructive rivalries, and war. It’s stubborn dogma. In truth, the EU’s current strategy to bring Europeans closer is having exactly the opposite effect. In Greece, Cyprus, Italy, and Spain, Germany has become everybody’s favorite villain; Merkel is demonised as the "financial fascist" by protesters.
Back to my picnic with Merkel. I admire her scientific approach to problems. But Merkel is a political animal too, of course. She has an exceptionally hard business side. She "gets" power. It’s a daunting task and delicate balancing act she has ahead of her. Should she fail, Europe’s divisions will widen and German citizens will be out in the streets. I don’t see this happening: Merkel "gets" history too.