Angela Merkel's Moment

By Heather Conley

How would you like to go down in history as the person who "lost Europe," "lost Germany," or simultaneously lost both? This is the question that Chancellor Angela Merkel of Germany may face sooner rather than later.

The European sovereign debt crisis was never meant to be Merkel's defining moment or her lasting legacy. Her moment was her election in 2005. As the first woman-a physicist and the daughter of a Lutheran minister-and the first politician from the former East Germany to become chancellor, Merkel herself was the message that Germany had entered a new, post-reunification political era.

Reelected in September 2009 with 33.8 percent of the vote, combined with a more closely aligned ideological coalition, Merkel's historic moment appeared to be solidified. But two months later, a Greek budget crisis began, resulting in the near collapse of the Greek financial sector in May 2010 and eliciting the first of no less than 20 European crisis summits in an attempt to solve, re-solve, or not solve at all, a deepening and widening debt crisis.

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Merkel the brilliant political tactician has been on full display over the past two years, reflected in her near 70 percent popularity among the German electorate. Merkel's message has remained publicly tough, insisting that countries that run into debt and deficit difficulties must change their errant ways. This played well to an increasingly skeptical German taxpayer and her fractious coalition, providing encouragement for Merkel's reelection bid in 2013.

At the same time, Merkel supported more European integration, with the German parliament supporting three bailout packages (for Greece, Ireland, and Portugal) and two bailout funding mechanisms (the European Financial Stability Fund and the European Stability Mechanism, or ESM) to the tune, thus far, of nearly €650 billion of German taxpayer funds. Despite two German resignations from the European Central Bank (ECB) Executive Committee and growing hostility from the Bundesbank and prominent German economists, Merkel has also given her blessing to €1 trillion in ECB long-term refinancing operations and, following the September 6 ECB Governing Council meeting, unlimited bond purchases on the secondary market of distressed euro zone economies.

Merkel has had it both ways politically. But as she has juggled demands for greater austerity and bailout support, her political maneuverability has been constricted by her national constitution and the power of the German Constitutional Court based in Karlsruhe. Repeated rulings from Karlsruhe have granted more oversight power to the German parliament while allowing European-level decisions to proceed.

On September 12, the Constitutional Court will determine if the €700 billion ESM and fiscal compact treaty are consistent with the German constitution or Basic Law. Some anticipate the Constitutional Court's answer will find a way for the ESM to proceed with yet more parliamentary restrictions.

The answer could also be "yes, but." Yes, the ESM can proceed, but only if the 1949 Basic Law is changed. This will be extremely difficult to accomplish, as the only way to amend the Basic Law is by a two-thirds majority in both the lower and upper houses of the Bundestag. This is why there is growing speculation about holding a national referendum to decide the issue. The problem with asking the German people what they think about handing more sovereignty to Brussels is that the act itself is unconstitutional. Article 146 of the Basic Law only provides for the possibility of a national plebiscite to initiate the drafting of a new constitution, not changing the Basic Law itself.

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Heather A. Conley is senior fellow and director of the Europe Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C.

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