Germany Stays The Course On Austerity Measures

The elections in France and Greece signaled a resounding popular rejection of the tough austerity measures being pushed by Germany, Europe's largest economy. But Berlin doesn't appear to be changing course.

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DAVID GREENE, HOST:

As Eleanor Beardsley just mentioned in her report, all eyes will be on how France's new president gets along with Germany. And let's get the view from Germany now from NPR's Eric Westervelt, who's in Berlin.

Eric, good morning.

ERIC WESTERVELT, BYLINE: Good morning, David.

GREENE: And, you know, German Chancellor Angela Merkel has been committed to this policy of pressing debt-troubled countries to cut deficits, trim spending, and we've read those headlines for some time now. But we hear one analyst in Eleanor's report there saying that Berlin might have to compromise on these austerity measures. Is there any sign of that yet?

WESTERVELT: Well, David, I'm not seeing many signs of compromise here so far. I mean the chancellor yesterday, and senior officials in her party, are making it pretty clear that the emphasis is going to remain on maintaining, you know, strict budget-cutting targets and structural reforms, you know, such as opening up restrictive labor markets and tax reforms. But not on any substantial new plans for increased spending or stimulus, which Germany really still strongly opposes.

Yesterday at a press meeting, Merkel once again ruled out any debt-financed growth programs. He pledged to work with the new French president and welcome him to Berlin with open arms, as she put it, very soon.

But, you know, as Eleanor pointed out, she also made clear, David, she's not interested in any reworking of this European fiscal pact, you know, a pact that's all about belt-tightening. She said yesterday that pact is not negotiable.

GREENE: Well, what does history say? Can a new French leader have some leverage and be able to force a German leader to make some changes?

WESTERVELT: Well, we'll see. Obviously the French/German alliance is important, and Merkel made clear yesterday she's willing to work closely with the new president. But I think time will tell. The ground may shift a little. There's a growing sense here in German that austerity alone is not working, and then in some cases it has made things worse, that it's been too rigid and implemented too fast.

And you know, the opposition Social Democrats here have praised Hollande's victory and said it signals a new direction for all of Europe. So there is some pressure there. And Merkel is under some pressure at home as well because her CDU party suffered, you know, a setback in local elections over the weekend, which adds new pressures.

There are some winds blowing for some kind of potential change, but I have to stress that really the deep commitment across party lines is still the cost-cutting, and not, you know, new spending plans.

GREENE: You know, Eric, as we look forward, if there are doubts growing about, you know, the austerity measures that have been in place, are there alternatives out there?

WESTERVELT: Well, President-elect Hollande has talked about, you know, new stimulus plans and a growth pact, but that's really not in the cards for Germany right now. I mean, there's talk of using unspent EU structural funds for stimulus, David, but that's pretty low-hanging fruit. It's really not that much money. It's unlikely to have a big impact, and it could be politically popular, but it's really not going to be a game changer on the ground here.

GREENE: What about other countries around the EU, these other austerity-supporting leaders? I mean are they still firmly behind Merkel or is there some weakening there?

WESTERVELT: Well, I think she's pretty isolated right now in Europe, David. I mean, Sarkozy's on the way out. He was a key ally despite a rocky relationship at times. The Netherlands, another key ally, has been thrown into political turmoil after the coalition government there recently collapsed, largely over, you know, a right-wing party's opposition to austerity measures. So she's sticking to her guns, but she is increasingly, I think, isolated on the continent.

GREENE: You know, Greece is facing a lot of new pressure today as well. The dominant political parties that supported the EU bailouts were defeated in favor of far-right and far-left parties in parliament. And you know, we're talking about France, but the true German nightmare might end up being Greece, yet again, you know, falling into political and economic crisis.

WESTERVELT: Absolutely, David. I mean Merkel yesterday, you know, had a strong warning for Greece, saying, you know, you need to stick to your cost cutting goals and structural reform plans. But there's a big fear in Berlin that the door will now be open in Greece to try to renegotiate the terms of these two bailouts. You know, there's some commentators in the papers this morning saying, you know, here we go again with Greece.

So while all eyes are on France, really the fear is about Greece backsliding and backtracking. And there's a kind of donor fatigue among German voters, especially after these two bailouts of Greece, also bailouts of Ireland and Portugal. They feel like they've done their share to support, you know, their struggling neighbors in the eurozone currency and they really want the emphasis to remain on deficit cutting.

GREENE: Eric, thanks so much.

WESTERVELT: You're welcome.

GREENE: That's NPR's Eric Westervelt speaking to us from Berlin about the new political reality unfolding in Europe.

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