G8 summit

Jan Techau is director of Carnegie Europe at the European Institute of the Carnegie Endowment for International Peace and an expert on EU foreign policy and transatlantic relations.

DW: It appears to be getting lonelier around German Chancellor Angela Merkel. She seems to be isolating herself with her view of stimulating growth without generating new debt. What position did she bring with her to the G8 summit at Camp David?

Jan Techau: She is certainly under a lot of pressure to make concessions with regard to austerity measures. In the context of Europe, she is always considered to be behind the austerity measures. For months, Germany has been asked to pump more money into the market, to be more Keynesian, to stimulate the economy by spending more money. For a long time she doggedly resisted, but in the last few weeks she has softened her own position somewhat - beginning even before the French elections. When she said that we could add a small growth package to the austerity measures, she signaled that she was prepared to entertain such an idea if, conversely, it saved last December's fiscal pact. She knows - just like everybody else - that as soon as the fiscal pact is called into question it would have disastrous consequences - and that must be avoided. She is not the only one who recognizes this.

How much of Merkel's apparent change in strategy is really due to Hollande's entering office in France?

I think that it's been overestimated. Of course, it will be more difficult for her with a French president who insists on a stimulus package, but when you take a closer look it never really was a drastic austerity dictate, as was always claimed. The German position, since last summer, is a very balanced approach: Of course, we show solidarity and money is pumped into the system, in the financial markets, but also to governments; and on the other side, the recipients of this largesse are supposed to make cost-cutting efforts and undertake structural reforms. This is a very sensible approach, which, of course, could be greatly improved in a few points, although it is still a good balance. The chancellor is not going to give that up. She has invested a great deal of political capital. It is also the price for keeping things quiet on the home front.

This fits into the debate over the last few weeks that essentially everybody want the same thing and that austerity and growth are not mutually exclusive. Is this perhaps just a question of communication and different rhetoric?

Exactly. The pact is much more balanced than was always claimed, especially by Angela Merkel's political adversaries. If I were her opponent, I would have done the same, of course. But in this case, it is an unfair argument being used against her position. The whole debate is a lot of rhetoric. There are really very few alternatives, when you take a close look at the possibilities that government spending, Keynesian style, could actually achieve. Even before the crisis, some countries that received transfer payments, notably Spain and Greece, couldn't even spend all the money they got from the EU for regional projects or infrastructure funding. And that was before the crisis. So, how could they now just take a huge sum of money tossed into their lap and get their economies back in shape? That just isn't enough. There is still a lot of leeway and a lot of political rhetoric going on.

US President Barack Obama has repeatedly stressed that the Europeans are not doing enough to tackle the crisis. Essentially, he means Angela Merkel. What does he really want from her?

Washington wants a clear signal from the Germans that they stand behind a solution to the crisis and that they are bringing their entire economic might to bear on managing the crisis. Obama needs such a signal for his own domestic political reasons. He is in the midst of an election campaign and must demonstrate his clout in global affairs. Everything the Europeans do affects Americans very directly. Everything is connected, and if there were to be some disastrous development in Europe, then the Americans would be directly affected. It is no different in Asia, where they are also watching Europe with great concern. Obama is coming from a credible position because he gave the US two very large economic stimulus packages, which were a big help to the US economy, but for which he is now facing intense criticism from his Republican opponents. Even if there is a great deal of resistance in the US to government intervention, Obama did exactly that, accumulating enormous government debt to jump-start the economy. It helped the US get through the crisis relatively well. But I do not think even he can get Angela Merkel to deviate from her principles - even if the voice of the American president carries a lot of weight.

In Europe then, in your view, there will not be a big US-style stimulus package?

There will be small measures - perhaps even a small stimulus package. There are many ways to construct such a package, but certainly it will basically maintain the balance between solidarity and financing on the one hand, and structural reforms and austerity measures on the other.

That is also Angela Merkel's position. Would you say, then, that she is not isolating herself?

I think she is in no way isolated. Of course, the pressure is growing, but if you look at the positions of the other governments - even the French government - then you will see that the issue is to keep the balance and maintain European unity. The Europeans have been surprisingly united throughout the crisis - even if it is always presented differently. They often responded very rapidly; he stability mechanisms and rescue fund were introduced quickly and everybody stood behind them. And you cannot emphasize it enough: The Europeans have stuck together the entire time and there just is no such thing as a German dictate, even if the Greeks especially like to claim as much. I think everyone realizes the necessity to stick together and not to isolate the Germans. Nobody can afford to lose the Germans. That is why the pressure other countries can exert on Germany is naturally limited in scope. The reality is another. Germany's economy is strong, France's relatively weak, and the Greek economy is very weak. No presidential election in France is going to change that.

Interview: Nina Haase, Brussels / gb
Editor: Simon Bone