German left softer on Merkel austerity than French Socialists

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Even though French Socialists launched a personal attack on Angela Merkel's financial housekeeping in their European roadmap, their centre-left colleagues in Germany are playing a subtler endgame, EURACTIV France reports.

Ahead of the September Bundestag elections, the German Social-Democrats (SPD) are faced with the difficult task of distinguishing themselves from the right while vowing to keep German finances in order 'à la Merkel.'

France’s economic deficit makes it easier for French socialists to decry the “selfish intransigence” of the German leader and her EU-wide austerity policies than in Germany, which is still recording economic growth and where Merkel is enjoying a period of considerable popularity. What is more, strong financial housekeeping has historic pull in Germany since the super-inflation of the 1930s.

As such the German Social-Democrats come across as more diplomatic than their French counterparts, describing the criticism as part of wider European “debate”.

“You have to distinguish between the level at which on the one hand the governments and heads of states cooperate and on the other the political parties,” said Axel Schäfer, SPD vice-president in the Bundestag. “It signals a normal debate between the political families at the European level.”

To Hannes Swoboda, the leader of the Socialists and Democrats group in the European Parliament, the chancellor “should not be surprised by the criticisms of the French socialists”.

“We are debating seriously the role that she has,” he said. To others on the German left, it is time to go on the offensive.

“[Merkel] pinches the ideas of others and then puts her stamp on them, like the minimum wage. They are in a campaign so have nothing against an offensive approach,” said Hélène Miard-Delacroix, a professor of civilisation and specialist on Germany at the Sorbonne University in Paris, France.

On 23 May, the SPD will host French President François Hollande to celebrate the 150th anniversary of the party, which has its roots in the German labour movement. Despite its longevity, the SPD is in the midst of a crisis of credibility, so lining up with a president who is deeply unpopular in his homeland may not help their case.

But a healthy relationship with France may help persuade Germans that the SPD is ready for high office. “The social democrats have to show that they can govern and a good understanding with France is one of the givens,” said Miard-Delacroix.

Nagging eurobonds

There are similarities between the French Socialist Party’s (PS) European roadmap and the SPDs plans, such as in the introduction of an EU-wide minimum wage, adapted to national circumstances. “We need a law because the unions are not strong enough in Europe,” said Schäfer, who supports an hourly rate of €8.50 in Germany, while the right advocates an agreement between industries and businesses.

The parties also agree on a financial transaction tax. The SPD is open to using it as a new resource for the EU budget, in a clear challenge to Merkel. “We need investments for the future to counter the recession. The revenues from this tax could be used to this end, by the states or by the European Union,” said Udo Bullan, an SPD member of the European Parliament.

But the issue of eurobonds continues to nag, raising hopes and fears in equal measure. The PS supports the common issuance of ‘EU bills’ to allow eurozone countries to tackle their deficits and refinance over the short term. It also refers to the “large-scale mutualisation of the debts of the member states of the eurozone”. However, aware that their country would be the likely guarantor of such a scheme, the SPD are taking a subtler approach.

Playing firefighter

The SPD supports a less ambitious solution to the debt crisis based on the creation of a ‘redemption fund’, which would gather together all the debts of eurozone countries above 60% of GDP. The international tool would be able to issue bonds to refinance debt on favourable terms – lower interest rates – with the member states acting as guarantors.

This would “put a stop to the speculation against the countries of the eurozone”, said Bullmann. “It is not a question of faith, but more an instrument through which no country would be labelled as treasury of the EU.”

Furthermore, the fund would exist for 25 years, the time needed to pay off the debt. “The SPD does not want the ECB to control national banks for more than five years,” said Miard-Delacroix. “They’d accept to play firefighters but only for a limited period.”

Disagreements remain over the direct recapitalisation of banks. For the SPD, the European stability mechanism (ESM) remains an “umbrella to save the states, but not the banks”, Miard-Delacroix added.

In an interview with French daily Le Monde, the SPD’s candidate for the chancellorship, Peer Steinbrück, said he was for a banking union but brushed aside the idea of a European-level debt guarantor. “I do not think that we could have rapidly a common European fund,” he said. “I could not persuade a German savings account to pay for a foreign bank which had ignored the risks and taken bad decisions.”

Germany, the EU's most populous state and economic powerhouse, will hold a general election on 22 September.

The incumbent, Angela Merkel, remains popular because of the strength of the economy and her steady handling of the eurozone debt crisis.

She is currently leading in the opinion polls for the Christian Union (CDU/CSU) and will face the Social-Democrat candidate Peer Steinbrück (SPD).

The SPD's approval ratings currently sit at 23-27%, while the CDU/CSU registers 40-41%.

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