Merkel walking line between German voters, European image

As Athens staggers toward what may be its final deadline, German Chancellor Angela Merkel faces one of the toughest decisions of her 10-year tenure: sacrifice political credibility at home by conceding more aid for Greece, or risk tarnishing her status as "queen of Europe" by sticking to her guns and facing the blame for the first-ever exit of a country from the euro.

The pressure is enormous and one thing is certain: Merkel has to make a decision that won't satisfy everyone.

As she headed to an emergency eurozone summit this week, Germany's top-selling Bild newspaper portrayed Merkel in a spiked Prussian helmet, with a headline declaring "today we need the Iron Chancellor." It demanded: "no new billions for Greece."

The weekly Der Spiegel, meanwhile, pictured her among Greek ruins under the headline "the rubble woman" – a reference to the women who helped clear devastated German cities after World War II. Its message: "If the euro fails, Merkel's chancellorship fails."

The headlines from the hardline Bild and the liberal-leaning Der Spiegel illustrate the balancing act that Merkel has performed, so far successfully, for five years: help struggling countries that accept tough budget cuts and reforms while convincing Germans she is defending their interests and wallets.

Since Greek Prime Minister Alexis Tsipras called a referendum on creditors' demands, she has dusted off her famous phrase "if the euro fails, Europe fails" (a slogan that Spiegel ironically echoed in its own headline.)
It was a saying she used frequently in the early phases of Europe's debt crisis as a general warning that the currency's failure would endanger the idea of European unity. Now she has fine-tuned the message: danger to the euro would come from abandoning the rule-respecting, aid-for-reform principles of the rescue effort.

"Germany does not want to pay the price for keeping Greece in the eurozone by getting a transfer union in exchange," said UniCredit's chief German economist, Andreas Rees. "The ball is now in the Greek camp – only if Prime Minister Tsipras makes concessions, Chancellor Merkel might show some flexibility in exchange. If not, Greece is leaving the eurozone."

Late Thursday, Greece submitted a proposal for a new bailout worth nearly $60 billion in exchange for sweeping measures including pension cuts and tax hikes. It remained to be seen whether that would satisfy skeptical creditors. Hans-Peter Friedrich, a lawmaker with Merkel's conservative bloc, told Deutschlandfunk radio that "we will ask critical questions."

The decision on Greece's future is far from being Merkel's alone. But as leader of Europe's biggest economic power and a figure strongly identified with the eurozone's rescue efforts, she has the experience and clout to steer the ship – and is a prime target for the blame if things go badly wrong.

"She knows that a 'Grexit' would mean a failure of her crisis policies of the past five years," said Julian Rappold of the German Council on Foreign Relations think tank in Berlin.

"She would be perceived in future as the one who pushed Greece out of the euro. But she also now has very little room for maneuver inside her own party, and the German population is more and more skeptical."

Recent polls suggest that Germans are in no mood to cut Greece more slack, showing them solidly against more concessions to Athens and either evenly divided on the country's euro exit or in favor of it leaving.

Andrea Caroselli, a self-employed supporter of Merkel's party from the southwestern city of Mannheim, said she hasn't followed the situation in detail – "but I think Merkel's policies are consistent, and that is right."

Vladimir Sedlak, a longtime Berlin resident originally from Slovakia, said he believes Merkel's ability to be flexible is hindered by cost-cutting demands from Greece's formal creditors, including the International Monetary Fund, but that she has been determined do the right thing.

"Greece hasn't played a fair game from the outset in order to buy more time," said the 34-year-old who works for a sightseeing company.

The mood is reflected in remarkably tough talk even from the junior partners in Merkel's coalition, the center-left Social Democrats, who often criticized her austerity-heavy approach when in opposition from 2009 to 2013.

Greece's "no" vote to reforms demanded by creditors "is a rejection of the rules of the economic and currency union," Vice Chancellor Sigmar Gabriel said this week. The Social Democrat added that Athens could not be allowed to push through its national interests unconditionally.

"Ultimately, every member state would demand special rights for itself like Greece," he said, "and that would be the end of the eurozone."

If there's a new deal with Greece, Merkel will need to go the German Parliament to get a mandate to open negotiations, and again to get approval for any bailout package that emerges. And although her government holds around four-fifths of the seats, she will be keen to ensure an agreement is tough enough that she doesn't risk a major rebellion in her own conservative party.

Already, a small but growing hard core of conservative lawmakers has long opposed eurozone rescue measures and has been signaling distaste at the idea of approving any further aid to a radical left-led government.

Still, Merkel can draw on large reserves of political capital and long experience of emerging ultimately unscathed from difficult positions. She has long thrived on a cautious, methodical approach to politics and tends to avoid taking unpredictable risks.

While she has avoided talking directly about a Greek euro exit, she has appeared to lay the groundwork lately for that possibility – and for preserving her own legacy, whatever happens.

She has laid the blame squarely on Greece for failing to compromise before Tsipras' referendum and touted German-led efforts to strengthen the eurozone's defenses.

"There is a lot at stake. The world is watching us," Merkel told Parliament last week.

"But the future of Europe is not at stake; the future of Europe would be at stake if we were to forget who we are and what makes us strong: a community of law and responsibility. If we were to forget that, the euro would have failed and with it Europe." [AP]