March 26, 2010 8:28 pm

Deal shows Merkel has staked out strong role

The deal done in Brussels on Thursday to assure Greece of a financial parachute looked on the face of it awfully old-fashioned.

It was a classic Franco-German double-act – a deal between Paris and Berlin, then presented as a fait accompli to the other 14 members of the eurozone, and indeed the rest of the European Union.

There was muttering among the smaller member states about the high-handed manner in which it was presented. “We are happy with the contents, but we don’t want the way this deal was reached to become a precedent,” said a Finnish official

Yet the enlarged EU is very different to what it was when France and Germany dominated decision-making 30 years ago. The Franco-German motor is no longer a balanced two-stroke engine: on matters economic, at least, Germany now dominates.

This week’s Brussels summit was the moment when Angela Merkel, the German chancellor, underlined her emergence as the European leader who matters most.

Ms Merkel came to Brussels with some fundamental demands: the International Monetary Fund must be substantially involved in any rescue; Greece must have exhausted its capacity to borrow from the market; and the other eurozone states must commit to far tougher sanctions for budget indiscipline. She got the lot. In exchange, Nicolas Sarkozy, the French president, got a “mechanism” for rescuing Greece – but with a German right to veto it at the last moment – and some window-dressing about improving “economic governance”. Treaty change, which Ms Merkel favours, is almost off the agenda. That will be a relief to London and Paris.

That did not stop Mr Sarkozy from claiming it as a Franco-German triumph. It was a “relief for all of Europe to show that we could agree”, he said. It also “proved the responsibility of Germany for European integration”.

Ms Merkel was gracious in her moment of triumph. She now attracts almost as many correspondents to her press conferences as Margaret Thatcher did in her heyday “but is less shrill”, said one Brussels official.

“Stability of the euro and solidarity are two sides of the same coin,” she said, echoing the words of José Manuel Barroso, Commission president, when he tacitly criticised her previous insistence on “stability” above all other virtues.

Ms Merkel sees herself as a good European, say her close advisers. Her instinct is to do deals. It is quite wrong to characterise her as representing a new insistence on the German national interest, they say.

“She is not the guardian of the German saver,” an official said on the eve of the summit. “She is the guardian of the stability of the euro.”

So why did she opt for a Franco-German deal and not try to involve other eurozone members? It is partly tradition, her advisers say. Paris and Berlin now seek to co-ordinate before summits. But it is “all the more important, the further we are apart. If we do have the same position [at the start], we can’t bring others along the way.”

This time it was more. Stability of the euro was a question of paramount national importance for Ms Merkel. It was the fundamental guarantee behind the decision to give up the deutschemark in 1999. It is enshrined in the judgments of the German constitutional court. Ms Merkel, an instinctive seeker of compromise, saw her room for manoeuvre as minimal, in terms of the EU treaty, and the constitutional court.

That at least is the word from Berlin.

In the end, the other members barely changed the words in the Franco-German text. They had to accept the package as it stood. But the real reason was not a Franco-German stitch-up. It was because of a tough lady from Berlin.

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