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Aug 12, 2013 | 21:34 GMT

Germany's EU Balancing Act

The German Central Bank believes Greece will need further financial aid in early 2014, according to an article published in the German paper Der Spiegel on Sunday. This story puts the European crisis and Germany's role as financier at the center of the national debate ahead of the Sept. 22 parliamentary elections. However, Angela Merkel, seeking a third term as chancellor, will try to postpone any debate and negotiation on the matter on a European level until after the elections. 

Merkel is very popular because of her image as protector of German taxpayer's money, despite the fact that Germany under her leadership has agreed to numerous bailouts to eurozone countries. Whoever is in power in Berlin after the elections will try to sustain that same balance and paradox. There is still some room for Berlin to agree to further piecemeal aid, but this will become gradually more difficult as the German economy itself increasingly struggles.

Following the leak by Der Spiegel, the German opposition parties accused Merkel of lying to voters about the chances of further aid to crisis countries. On Monday, the German Finance Ministry denied having any knowledge of the document, which the German Central Bank reportedly prepared for the German Finance Ministry and International Monetary Fund.

The German population is largely skeptical towards bailouts for other countries and Merkel has over the past years been successful at addressing this skepticism by pushing crisis countries, such as Greece or Portugal, to implement structural reforms and austerity measures in return for limited aid. Moreover, Germany has been one of the few eurozone members to grow despite the crisis, and Germany's unemployment rate is one of the lowest in the European Union. This has allowed Merkel to remain popular despite granting bailouts to countries in southern Europe. The opposition parties have been largely unsuccessful in criticizing Merkel's European crisis policy because it is unclear what they would do differently. Calling for more solidarity with the rest of Europe is unlikely to win many votes especially in light of sluggish growth in Germany.

Pointing out that Merkel isn't consistent because she first denies aid but later gives in anyway, might help weaken her popularity over the coming weeks. However, whoever is in charge in Berlin will be trying to strike the same balance as Merkel has for the past years.

For Germany, preserving the eurozone and European Common Market is vital because they offer Germany's export-oriented economy access to the European-wide consumer base. However, the challenge for the German leadership is to convince voters that European integration is important to sustain Germany's prosperity and therefore Germany's taxpayers should make more far-reaching sacrifices.

By demanding austerity in crisis countries in return for limited aid, Berlin has managed to appease German voters in the shorter term but has also weakened the European consumer base to the point where the cost of getting countries out of the crisis is unlikely manageable for Germany alone and is increasingly hurting Germany's economy itself.

Despite campaign rhetoric, Germany's mainstream political parties know that additional financial assistance to eurozone countries in crisis will be necessary to keep the common currency alive. However, the fact that this hasn't been publicly admitted and dealt with in a systematic way earlier during the crisis, for example by agreeing to common issued debt, shows that the German leadership is sending mixed signals to voters, combining pro-EU rhetoric with a hard stance on crisis countries. This makes tough decisions, such as financial assistance to countries in distress or structural reforms in the eurozone, increasingly costly for the German leadership.

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