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Jan 19, 2011 | 21:32 GMT

3 mins read

Dispatch: Understanding Germany's Commitment to the Eurozone

Analyst Marko Papic examines German Chancellor Angela Merkel's statements about Germany's commitment to the eurozone, which come despite public discontent with Berlin's bailout policies. Editor’s Note: Transcripts are generated using speech-recognition technology. Therefore, STRATFOR cannot guarantee their complete accuracy. German Chancellor Angela Merkel has come out in support of the eurozone in a major interview on Wednesday; however, support for eurozone bailouts remains very low amongst the German populace. Chancellor Angela Merkel stressed on Wednesday that Germany would not return to the Deutchmark under her watch. She also made it clear that Germans support for eurozone was complete and that Berlin would do whatever it takes to continue to support the Kurds union. Merkel also dismissed the notion of a split between fiscally prudent Northern economies and peripheral economies in the south in the Mediterranean. She also rejected the notion that the eurozone would have to be restructured anytime soon. Supporting peripheral European economies to bailouts is however extremely unpopular with the German populace. Survey showed that about 50% of German population would prefer a return to the Deautchmark from Germans perspective, Germany had undergone austerity measures of its own before a crisis even started back in early 2000s. There is therefore resentment towards the idea that Germany would now be supporting peripheral eurozone countries with bailouts in order to encourage them to enact austerity measures the Germans did on their own. There is no doubt that the eurozone is beneficial for Germany. About 43% of all Germany's exports go to it’s Eurozone partners. It's extremely beneficial to be able to tie down its eurozone neighbors into the single currency union, thus making it impossible for them to devalue their domestic currencies and gain a competitive advantage against Germany. Furthermore the current economic crisis is enhancing Germany's political power because it has afforded Germany the opportunity to force its economic and fiscal reforms on the rest of its eurozone member states. The problem however is that Angela Merkel cannot explain these benefits fully to her own population. If she went into the specifics of how exactly it is the Berlin has benefited from the crisis and has enhanced its political control of Europe, the eurozone neighbors would obviously hear that.  And this would create a political problem in the relationship Berlin has with the other eurozone member states. But at the same time, if she was to go into specifics of how exactly Germany will continue to support the eurozone beyond the rather vague rhetoric of Berlin doing whatever it takes, then she would have a problem with her own domestic constituents who don't want to really see Berlin continuing to support the eurozone, especially not monetarily through the bailouts. Unfortunately for Merkel and the German government, they don't have much time to decide how to best speak to these multiple audiences. There are four state elections in Germany between Feb. 20 and March 27 and then three more later in 2011. Merkel’s essentially going to have to start campaigning for the state election races and really keep competing throughout 2011, which will only diminish the ability of Berlin to speak to multiple audiences.

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