GERMANY NOW:In the second in a four-part series on Germany before a visit there by Enda Kenny on Wednesday,
DEREK SCALLYlooks at the obstacles confronting the chancellor.
WHEN ANGELA Merkel steps up to the microphone in Leipzig this morning, it is anything but business as usual.
The European Union’s future hangs over the Christian Democratic Union party conference.
And after three years of hoping that sticking-plaster solutions would heal the euro zone’s gaping wounds, the German chancellor will ask her party to back a quantum leap in the relationship between the European Union and its members.
The plan: to put the euro zone on a new, stable footing by creating binding European oversight of national budgets. The timetable: 12 months.
“This discussion doesn’t have to last forever,” said a senior government source.
“We think this could be discussed, negotiated and agreed within a year.”
After securing party backing, Merkel will discuss the proposal with Taoiseach Enda Kenny on Wednesday, while the Danish and British leaders visit Berlin later in the week.
The challenge Merkel has set herself in Europe comes as an emotional and divisive debate rages at home. Contrary to populist belief around Europe, “the Germans” are not in agreement over the EU’s future, or on Berlin’s role in shaping it.
To win the debate at home, Merkel needs to assuage the fears of German EU traditionalists, convince a wary constitutional court and neutralise the arguments of a new eurosceptic elite.
The face of this new elite is Hans-Olaf Henkel, once chief lobbyist for German industry and euro proponent. Now he is an anti-euro prophet and author of a bestselling book, Save our Money!
His prescription for Germany’s dilemma: exit the euro zone to create a new hard currency with Holland, Finland and Austria, leaving behind France, Italy, Spain, Greece and others to deal with their own problems in the original euro zone.
The potential price – massive losses on German euro zone loans and expensive exports thanks to a stronger new currency – is a bargain, he argues, compared to the uncertain cost of staying.
“We could shape a new euro, provisionally call it the Nordeuro, as it should have been, without eurobonds or mutual liability,” he says.
“Denmark, the Czech Republic and Sweden would join immediately and Ireland would, I think, be the first euro zone candidate to ascend into the Nordeuro.”
While similar to other proposals floating around the euro zone, Mr Henkel’s idea has caused shock waves here for questioning the traditional German idea of solidarity with its European neighbours, come what may.
His arguments have rubbed off on Merkel’s crisis-wracked coalition partner, the Free Democrats. A rebel faction of the party has forced a party vote on Berlin’s bailout strategy.
They are encouraging eurosceptics to become members and help torpedo January’s Bundestag vote on the permanent rescue mechanism. Within Merkel’s own Christian Democratic camp, there is also vast disagreement.
Mirroring the debate around Europe, one camp is calling for the EU to hold together at all costs, while another wants a 17-member euro zone avant garde to push on with closer integration of economic affairs overseen by a new body comprising national representatives.
Parallel to the political debate, Merkel is feeling friction from traditionalists in Frankfurt. The Bundesbank was once confident it had inculcated the ECB with its post-war tradition of inflation-fighting, independent monetary policy.
But now Bundesbank officials feel their grip on ECB monetary policy weakening with every bond-buying market intervention.
Incensed by this policy, Axel Weber quit the ECB board and the Bundesbank.
His successor is Jens Weidmann, a former student and, in a twist of fate, also former economic adviser to Merkel.
Weidmann has wasted no time switching roles, warning his former Berlin boss last week that decision time was looming between two euro zone options.
“The first would be a return to the founding principles . . . with an enhanced framework that ensures sufficient incentives for sound public finances,” he told bankers in Berlin.
“The second implies a major shift entailing a fundamental change in the federal structure of the EU, involving a transfer of national responsibilities – particularly for borrowing and incurring debt – to the EU.”
The final stumbling block Merkel may face is not the eurosceptic camp, or the Bundesbank, but time – and Germany’s constitution.
Usually, new European treaties or treaty changes sail through the Bundestag in Berlin with a sizeable majority. But the Merkel proposals to give Brussels oversight on national budgets touch on fundamental parliamentary rights mentioned explicitly as a no-go area by Germany’s constitutional court in its Lisbon Treaty.
Any such shift from Berlin to Brussels would require the creation of new, equivalent democratic oversights at European level – or a new constitution.
But this “would lead to huge difficulties”, said Dr Peter Selmer, constitutional professor emeritus at Hamburg University.
“I don’t see how that can be done in the time frame demanded.”
With the clock ticking, an undaunted Merkel has embarked on her operation transformation on two fronts.
She knows she can only push through new debt rules and budgetary oversight in Europe if she can overcome opposition at home. And there is no shortage of that.
With alarm bells ringing in the foreign ministry and her coalition partners in uproar, Merkel is mulling an all-or-nothing nuclear option: putting her radical EU 2.0 plans to a national referendum in Germany.