Will Angela Merkel bend to pressure on the euro?

Angela Merkel
Image caption Will the iron lady start to melt?

Might the lady finally be for turning? Is Chancellor Angela Merkel about to bend under enormous pressure to change direction on the euro? In Germany, the papers increasingly call her "Die Eiserne Lady" - but will the iron start to melt?

After all, she must be feeling the heat. At home, whether Europe needs the euro is now the hot topic among ordinary people. Exactly that question screamed from the front page of the tabloid Bild.

On page two, the paper's "top experts" had different opinions - but the point is that questioning the very existence of the euro is now prominent in the country's most popular newspaper. For ordinary German people, it is on their breakfast tables - and so on Chancellor Merkel's agenda.

In the Bundestag, members of the governing parties openly discuss "Plan B", a Greek exit from the euro. Her own party got a drubbing in a big regional election where the victorious opposition fought on an anti-austerity platform.

Opinion polls in Germany indicate exasperation at the Greek situation and disenchantment with the euro. One poll over the weekend had an albeit slim majority thinking the euro was a mistake in the first place. And it had a big majority indicating Greece should be allowed to leave.

And from abroad, the pressure is just as high. France's President Hollande came hot-foot to Berlin, straight from his inauguration, to register his desire for change.

President Obama fears that the fall-out will destroy any US recovery. As the New York Times put it, he's worried about Chancellor Merkel's "one-size-fits-all approach emphasising austerity".

Bottom line

So what's going to give? What is not going to give is the German taxpayer. The mood is hardening if anything.

Under the country's constitution, new substantial transfers of funds out of Germany have to be approved by the Bundestag - and the Bundestag is simply not going to vote for that in the present atmosphere.

Chancellor Merkel also has to get the "fiskalpakt" ratified by the German parliament - and with a two-thirds majority - in this increasingly unhelpful atmosphere.

And obviously, if Germany does not ratify the strict rules tying government spending to revenue (with its allergy to borrowing), then the thing dies. All those summits will have come to nought.

So the bottom line is that the fundamental policy of the German government is unchanged: getting debt down is the pre-requisite for growth; stimulus to prompt an economy into action won't work. As one official told the BBC: "You don't get growth by running a bigger deficit."

On Greece, the German government wants it to vote to remain in the eurozone - but not at any price. As Finance Minister Wolfgang Schaeuble put it to Bild on Sunday: "To tell the Greeks that they need not apply austerity deals to which they have agreed is to lie to them."

On top of that, Germany remains opposed to eurobonds, whereby the debts of individual members of the eurozone are collectively shouldered.

'Spook investors'

There is, though, a recognition in the government in Berlin that the new regime in Paris has "to be given something" - but with the caveat that, as the finance ministry sees it, "there are many ways to encourage growth without spending money".

The German finance ministry thinks, for example, that the 340bn euros (£275bn) of the European Union's "structural funds" could be more effectively used to promote growth. This money is meant for projects to do with transport or the environment and such like, with the aim of narrowing the gap between poor and rich regions.

But the German finance ministry feels it could be better targeted at the education and training of workers and potential workers.

Image caption Mr Schaeuble says German wages could afford to grow faster than in other parts of the EU

This is far from the stimulus to the economy which some of Chancellor Merkel's critics outside Germany want, but it is the view of the government that a stimulus would, as one official put it, "spook investors" and so be counter-productive.

Of course, German attitudes - both in government and among voters - might change if the crisis turned into a catastrophe.

If the economic difficulties of Greece and Spain morphed into a full-blown financial crisis, then the landscape would be different and dangerous and demand a reaction from Berlin - but that is not the current situation.

One thing that may already be changing quietly is the German government's attitude to inflation. It will not trumpet any increased tolerance of rising prices - that is not what German governments do.

But Finance Minister Schaeuble said recently that wages in Germany could afford to grow faster than in other parts of the European Union.

One of the reasons the pressure has tightened to breaking point in Greece, in particular, has been the growing uncompetitiveness with Germany. In the last decade or so, German wages have barely grown, seeing only a fraction of the growth of wages in the other eurozone countries.

But German wages are now rising. The country's largest industrial union, IG Metall, has just agreed to a 4.3% pay rise for nearly four million workers in the car and engineering industries - their biggest rise since 1992.

This might improve matters somewhat for Greeks and Spaniards in difficulty. After all, when Germans spend money, they do so as sun-seeking tourists. When Germans splash out, they like to do it in the Mediterranean.

But this won't get the barricades dismantled in Athens. Nor will slightly higher growth of German spending prompt the mass uncorking of celebratory bottles of Cava.

In countries where 50% of young people can't find work, relief is not obviously at hand.