Germany and Merkel hold Europe's fate in their hands

Visitors at the Berlin Wall memorial

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The once-divided city of Berlin now has the task of holding Europe together and, for Chancellor Angela Merkel, this will require a difficult balancing act.

The late-afternoon sun throws long shadows across the austere Berlin Wall memorial on Bernauer Strasse.

Sections of the wall covered in fading graffiti stand next to posts of rusting metal, the same colour as the autumn leaves in the graveyard next door.

Between 1961 and 1989, at least 136 people died at the wall - most of them fugitives trying to cross into the enclave of West Berlin from the communist East.

So this is a city that knows a thing or two about division.

For 50 Cold-War years, Germany itself was divided and therefore politically weak.

But history has moved on.

Berlin is now the capital of a united country that has emerged from the Eurozone crisis as - indisputably - Europe's predominant power.

For decades, that was not an accolade that would have sat comfortably on German shoulders. Twice in the 20th Century this city was the crucible for devastating wars that ripped Europe apart.

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But now - as Europe's paymaster - it is where the future of the Eurozone will ultimately be decided. Leading from behind - the default position of a generation of German policymakers - is no longer an option.

Many European allies would like things to move much faster. There is plenty of frustration that Germany has been reluctant to embrace a comprehensive solution to the Eurozone's complex problems.

A year ago, Poland's foreign minister Radek Sikorski came to Berlin to make a speech that was much remarked upon.

"I fear German power less," he said, "than I am beginning to fear German inactivity."

The billionaire investor and philanthropist George Soros has been even more emphatic. Germany, he said last month, should lead or leave.

The challenge is no longer division between East and West, but between north and south.

But leadership is a tricky business. Where does the right balance lie between offering help in the Eurozone and dictating terms?

As the German model of fiscal rectitude has spread across Europe, so have the cliches of a Fourth Reich and the German jackboot.

Protest in Athens against Angela Merkel's visit in October 2012 Police used tear gas on people protesting against Angela Merkel's visit to Athens

When Angela Merkel visited Athens earlier this month, protesters dressed as Nazis took to the streets. Old fears and prejudices lie close to the surface.

To put it bluntly, Germany has a bit of an image problem abroad. So does Mrs Merkel herself.

At home, things are rather different. They rather like her cautious deliberation and her unflustered style of crisis management.

That was clear at a meeting of the party faithful a few days ago in Potsdam on the outskirts of Berlin.

They had gathered in the Metropolis Hall (named after the famous Fritz Lang film) on the site of the oldest large-scale film studios in the world.

Outside - as the chancellor's motorcade swept in - there was an advert for Horror Night, although on closer examination it was referring to a Halloween celebration later this month.

Angela Merkel does not do trick or treat. She does slow and steady - not shock and awe.

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Greece does not really need to be lent more money - it needs to be given some”

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But over the past year or so, she has made greater efforts to reach out to countries where strict austerity measures are being imposed to persuade them that yes, she does care. Germany cares.

And she is trying to make the same case to her core constituency.

In Potsdam, she was firmly on home turf, but even here she was on a charm offensive for the euro. It is more than a currency, she said, and I want all countries to be part of it.

For a while earlier in the year, it was not clear that that was still the case. She appeared to be wavering on Greece.

Not any longer. Mrs Merkel now says explicitly that she wants Greece to stay in the Eurozone.

What is left unsaid is who is going to pay for that privilege.

Because Greece does not really need to be lent more money - it needs to be given some, either in the form of direct transfers or by writing off some of the debts it owes to countries like Germany.

Neither would go down well with the audience in Potsdam, as Germany heads into an election year.

But Mrs Merkel will go at her own pace. The pace she believes her country is comfortable with.

And that means all eyes should remain on Berlin. A city defined for decades by division now has the fate of European unity in its hands.

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