GO
Loading...

Why 'Merkelvellianism' Could Backfire for Angela

Kiran Moodley, special to CNBC.com
Tuesday, 7 May 2013 | 8:53 AM ET
German Chancellor Angela Merkel, speaks in front of a flag of the European Union
Sean Gallup | Getty Images
German Chancellor Angela Merkel, speaks in front of a flag of the European Union

German Chancellor Angela Merkel's insistence on tough austerity measures for countries on the receiving end of a bailout has angered many citizens in countries such as Greece and Cyprus. They argue that the pain she has inflicted on them merely serves to appease German taxpayers - and voters - who are fed up of footing the bill for profligate states. But that strategy may be backfiring, as calls grow for a more radical approach.

Increasingly, politicians both on the left and right, are now calling for Germany to leave the euro. They have become disillusioned with bailing out their European peers.

Oskar Lafontaine, who served as German finance minister when the euro was introduced, added his voice to the chorus of people who are convinced the euro in its current form is no longer viable.

"Hopes that the creation of the euro would force rational economic behavior on all sides were in vain," he wrote in an article published on his website last week.

He argues that the current system has failed and that the currency union should be broken up to enable countries such as Greece, Spain and Portugal to devalue their currencies in a "transitional phase" which allows for "controlled" devaluation and appreciation.

There is even now a new eurosceptic party in Germany, Alternative fur Deutschland (AFD), calling for the country to cut itself off from an ungrateful continent.

(Read More: Are You an Austerian or a Spendanigan? )

Talking to CNBC, Yogesh Dewan of Hassium Asset Management said : "The real mess in Europe's really just being caused by Merkel. This 'Merkelvellian' approach has put the fear of god up everybody: everybody's worried about unemployment; everybody's worried about the housing market; everybody's worried about the banking system."

Dewan suggested a defeat for Merkel in September could be a welcome change: "Maybe the elections in September might help...change the overall sentiment and optimism that actually exists in Europe."

(Read More: The Euro Crisis Is Actually Saving Germany Money )

While only polling around 5 percent currently, the new eurosceptic party has gained some 2,795 members from other major parties since its formation in February. According to Die Spiegel, 1,008 of AFD's 10,476 members have defected from Merkel's Christian Democratic Union (CDU) in what AFD leader Bernd Lucke is calling a noticeable "bloodletting" from established parties.

(Read More: ECB Should Weaken the Euro: Bini Smaghi )

Others, however, are staunchly against leaving the euro and defend Merkel's policies. As Merkel's coalition partners, the FDP, launched their election campaign, Philipp Roesler, the vice-chancellor, said that it was an irresponsible decision by the European Commission to relax budgetary constraints on EU countries. Roseler has particularly attacked French economic policies under President Francois Hollande, as relations between the two countries continue to sour.

(Read More: This Is Region's Real Problem Child, German Memo Says)

Pressure may mount on Merkel to similarly tap into anti-French sentiments to shore up support for her own fiscal policies, especially in light of a tax evasion scandal that saw her party slip in the polls at the start of May. Uli Hoeness, a prominent supporter and close ally of Merkel's, admitted that he had reported himself to tax authorities back in January having failed to disclose a Swiss bank account.

Her focus on austerity could help win votes, but many voters may be looking for more.

Editor's Picks

CNBC Meets