The crisis manager: Angela Merkel’s double-edged European legacy

I t was Monday 13 July 2015 and dawn had broken when Angela Merkel said it was all over: Greece would be leaving the eurozone. After 15 hours of all-nightcrisis talks, it looked like disaster. Merkel gathered her papers and was heading towards the door. If the summit had ended at that moment the history of the European Union, its fragile currency and Merkel’s legacy would be very different.

But the drama took another turn. Donald Tusk blocked the exit. Throughout the night, the French president, François Hollande, had been cajoling the German chancellor to think again. Now Tusk, European Council president, refused to let her leave, persuading her to reconvene with him and Greek prime minister Alexis Tsipras, warning of the stakes for the EU. “In five years in the discussions between Hollande and Merkel it was a unique occasion in which Hollande really won the battle with Merkel,” Pierre Sellal, then France’s ambassador to the EU, said. Hollande helped convince Merkel not to run the risk of ‘Grexit’, suggested Sellal: “It was Pandora’s box, the consequences of which were impossible to predict.”

Six years on it is Merkel, not Tusk nor Hollande, who is remembered as the saviour of the euro. Even arch critic Yanis Varoufakis, Greece’s former finance minister, told the BBC that Merkel saved the euro by keeping Greece in, although he disagrees with how she did it. The reason is simple: Greece could not have stayed in the eurozone if its largest EU creditor, Germany had not agreed.

Now, after 16 years and roughly 100 EU summits as Europe’s most powerful leader, Angela Merkel is preparing to leave the stage. For the EU it will be the end of an era. With her bright blazers and soundbite-free statements, Merkel is as much a fixture of EU summits as the flags and fine wines. Untouched by scandal, unshaken by referendums, the German chancellor has seen many leaders come and go, including four French presidents, five British prime ministers and eight Italian premiers.

But she leaves a double-edged legacy. Though she is credited with keeping the EU together during more than a decade of rolling crises – eurozone, migration, Brexit, Trump and then coronavirus – critics lament what they see as her lack of vision. For some, her approach was auf Sicht fahren – driving by sight. She navigated each crisis like a driver on a foggy road, edging forward, not sure where she was going, but always keeping the car on the road.

The unknown German chancellor

At her first EU summit in December 2005, Merkel was relatively unknown. The EU had just come through a period of rapid expansion. Poland, Hungary and eight other mostly central and eastern European countries had joined the club only 20 months earlier. Euro notes and coins had been in people’s pockets for less than four years. The UK, led by Tony Blair, a “passionate pro-European”, was in charge of the EU’s rotating presidency. But the optimistic mood had been soured by French and Dutch voters’ rejection of the Constitutional Treaty in 2005, leaving the project in a political tangle.

As Merkel’s successor will find, any German chancellor carries the clout of their office. Germany is the EU’s pre-eminent power: the richest economy, with the most votes and the biggest chequebook. “Obviously any German chancellor will play a major role in the European Union,” said Jim Cloos, who recently stood down as a long-serving senior official at the EU council. But the individual makes a difference. “The way she did things: she was a major power in the European Council,” said Cloos, who credits her with keeping the club together during the EU’s most difficult period since the end of the second world war. “We have held it together, actually – well, we lost the Britons, but that is their choice. We have done this in our usual chaotic, complicated way because we are a union of 27 states, and institutions.”

Back in 2005, the new German chancellor impressed the EU executive with her grasp of detail. Dalia Grybauskaitė, then the EU budget commissioner, recalls meeting Merkel in December to discuss fiendishly complex EU budget negotiations. “It was her fifth day in office. She knew the files as well as [then European Commission president] José Manuel Barroso and me.”

Grybauskaitė, who went on to serve as Lithuania’s president for a decade, described Merkel as “the queen of compromises”, who “never gives empty promises”. Alexander Stubb, another political ally in the centre-right European People’s party, sat next to Merkel at EU summits during his stint as Finland’s prime minister in 2014-15. “Angela Merkel was … by far the most impressive in the room. She was able to eloquently express what she wanted and then subtly show to the council secretariat … what she wanted in the council conclusions. In that sense she worked both as a politician and as a civil servant.”

Leaders from rival political traditions also rated her. Former Italian prime minister Enrico Letta, who now leads Italy’s main centre-left party, recalled her staying power. In 2014, when a G20 dinner in St Petersburg hosted by Russia’s Vladimir Putin ended at 2am after fraught discussions on Syria, Merkel was one of a handful of leaders who stayed to watch dancers of the Bolshoi ballet. Others went to bed, but she stayed for a chilly open-air, long-delayed performance of the romantic classic Ruslan and Lyudmila. “It was cold,” Letta recalled. “She decided not to go to sleep but to stay there and see the show and to give the dancers and to give Putin satisfaction, to say ‘we are here and we played a role until the end.’”

The economy

If the meticulous grasp of detail and endless stamina are not in doubt, critics say Merkel was too slow to grasp the threat to the eurozone after 2010, enforcing austerity on the debt-battered economies of southern Europe.

Letta, who was battling soaring youth unemployment in Italy acknowledges that she was hamstrung by her powerful finance minister, Wolfgang Schäuble, “the champion of austerity”, who was powerful in Merkel’s CDU party.

But facing a bailout-sceptical German public, Letta argues, Merkel took a crucial decision. She threw her weight behind an Italian to lead the European Central Bank. Her support took Mario Draghi to Frankfurt, over a more conservative northern European candidate. Eight months into the job, Draghi said the ECB would “do whatever it takes” to save the euro, words that proved a turning point in settling the sovereign debt crisis.

Merkel’s decision to back Draghi reflected her growing awareness that she must act for the EU and not simply Germany, Letta believes. “She started to have in this very period a European constituency, aside from her German constituency.”

But it was only later when the EU’s political constellation shifted, with Brexit diminishing the fiscally-conservative group of member states, that Merkel backed an unprecedented plan for joint EU borrowing, which resulted in the €750bn Covid recovery fund in July 2020. As the EU’s popularity in Italy slumped at the start of the pandemic, with Rome levelling accusations of being abandoned by the rest of Europe, the bloc acted unusually quickly. “All the leaders learned the lessons of the previous crisis,” said Letta. “The results of the previous austerity measures on Spain, on Italy and Greece were so clear … that helped in changing the approach.”

Luuk van Middelaar, a political theorist who advised the European Council president from 2010-14, said Germany had been slow to appreciate the gravity of the eurozone crisis. “For too long in Germany the discourse was that it was a story of sinners, spendthrifts who did not reform their economies … It took too long for the awareness to rise – and that also goes for Brussels – that this was a systemic issue for the eurozone as a whole.”

But the German chancellor had to balance German voters’ aversion to bailouts with the risk of economic and social chaos, he notes. “She also looked at the wider political context of what Grexit would mean for Europe as a whole, for the reputation of Germany as a whole, for its relationship with France and for stability in the Balkans,” van Middelaar said. In 2015 Merkel also rejected calls from other EU leaders to kick Greece out of the EU’s passport-border zone. “I have not kept Greece in the eurozone only to kick them out of Schengen,” she was reported to have said at the time.

Migration

On migration, Merkel is criticised not for excessive caution but for boldness. The EU is “still trying to accommodate” Merkel’s “national decisions” on migration, said Sellal. Visiting a refugee camp in late August 2015, Merkel said Germany could manage large numbers of people fleeing war and persecution: “wir schaffen das” (“we can manage this”). Soon after, she opened Germany’s borders to tens of thousands of Syrians and other refugees making their way through the Balkans. At a stroke, she had torn up the EU’s Dublin convention that requires asylum seekers to seek refuge in the first EU country of arrival.

While Germany’s integration of refugees is an untold success story, Merkel would be accused of encouraging hundreds of thousands to make the dangerous journey across the Mediterranean. “If we had not shown a friendly face, that’s not my country,” she said, justifying her decision later. Political allies say the chancellor was also worried about the influx of refugees destabilising the politically fragile countries in the western Balkans.

Some EU officials blame Merkel’s government and the European Commission led by Jean-Claude Juncker for forcing through a plan to distribute migrants around the bloc via quotas, in a deeply divisive qualified-majority vote in September 2015. Overruling central European leaders, the vote inflamed tensions with countries that refused quotas and alienated those that reluctantly accepted. For the former EU civil servant Cloos, “the combination of ‘wir schaffen das’ without any consultation” and compulsory migrant quotas was an error. But Merkel made up for it the following year by masterminding a controversial deal with Turkey that would close the Mediterranean route to migrants from the Middle East.

That deal was criticised by the UNHCR and rights groups at the time and is seen as a cornerstone of ‘fortress Europe’ approach to migration. Insiders argue it was essential to keep the EU together.

Defender of the liberal order?

EU unity was Merkel’s signature tune by 2016, a task that seemed even more urgent after the shocks of Brexit and the election of Donald Trump. In a speech four days after the Brexit result, Merkel said there would be “no cherrypicking” by Britain of its post-EU future, words that defined the EU’s approach to the next four years of Brexit battles.

And Brexiters who were counting on the German car industry to change Merkel’s mind were disappointed. In September 2016, Merkel told a private meeting of European industrialists that the EU could not afford to risk the single market by giving the British special treatment. Seated alongside Hollande, she compared the EU single market to a pullover: “when you have a hole, you don’t pull at the threads,” she is reported to have said, according to a diplomat who was there.

Rational, careful, democratic: the German chancellor in 2016 was cast as the anti-Trump, widely praised for standing up for democracy and the rule of law in response to the American tycoon’s election win. Yet she failed to confront the authoritarian in her midst: Viktor Orbán, a former EPP ally, who has taken control of state institutions to such an extent that Hungary is now classed as “partly free” in the Freedom House rankings, the first EU member state that is no longer a full democracy.

“In Hungary definitely she could have acted much earlier and really used her position of political clout and the power of the large country,” said Daniela Schwarzer, executive director for Europe at the Open Society Foundations, who points out German companies have a prominent position in Hungary as large investors and employers. “She repeatedly took a position vis- a-vis the US, when Trump was US president. But the Orbán case … looks like a contradiction and was a bad mistake.”

The next German chancellor

Merkel’s goodbye to the EU is likely to be drawn out. With German coalition talks expected to be slow and complicated, she could be in caretaker mode until the end of the year. Add in French elections in 2022, and few expect dramatic changes on the EU chessboard.

Merkel’s most likely successor, the SPD leader Olaf Scholz, is better known in EU circles. He chaired EU finance minister meetings in 2020 and has close ties to his French counterpart, Bruno Le Maire. But few expect Scholz, or his nearest-placed rival, former MEP and CDU candidate Armin Laschet, to take a different policy course to Merkel. “Both would probably take a pro-European but at the same time rather a cautious approach to deepening the EU,” Schwarzer suggests.

For countries that are close to Germany, another Merkel-style leader would be just fine. “We don’t need more drama. There is enough of that in politics today as it is,” said Stubb.

That will disappoint anyone looking for the next German chancellor to break the cautious Merkel mould. Keeping the EU together will not be enough in the post-Merkel era, write analysts at the European Council on Foreign Relations. “Next to keeping the EU together, the goal of defending core European values and interests should become the measure of a responsible EU leadership,” they write, citing the threats of a breakdown in the rule of law and the EU’s “geopolitical marginalisation”.

Most expect the next German chancellor to be a characteristically German chancellor, steady rather than spectacular. “It is usually French presidents who do the vision thing, launch initiatives and bring ideas,” said van Middelaar, “while German chancellors pull the brakes.”

But when problems arise, the rest of the EU looks to Berlin, he added. “Whenever a crisis erupts everyone looks first at you. Maybe not formally but informally, you are the leader of Europe. Whoever is in the chancellery will immediately feel this European weight.”