Merkel Blames SPD’s Schroeder for Letting Greece Into the Euro

By Stefan Nicola - Aug 28, 2013 1:00 AM GMT+0300

German Chancellor Angela Merkel sought to pin the blame for the euro-region’s debt turmoil on her Social Democratic predecessor, Gerhard Schroeder, saying he should never have let Greece into the single currency area.

Merkel, addressing a campaign rally in the northern German town of Rendsburg yesterday, said the debt crisis that emerged in Greece in late 2009 and dominated her second term had been “brewing for many years” going back to the euro’s inception.

“For example, Greece shouldn’t have been allowed into the euro” at the time of its admission in 2001, Merkel told a crowd of about 1,000 supporters. “Chancellor Schroeder accepted Greece in and weakened the Stability Pact and both decisions were fundamentally wrong, and one of the starting points for our current troubles.”

Merkel, by apportioning blame for the havoc caused across the 17-nation euro region on her SPD predecessor, may be seeking to deflect attacks on her crisis policy leveled by Peer Steinbrueck, her Social Democratic challenger in the Sept. 22 federal elections.

While polls suggest voters approve of her crisis handling, Steinbrueck has ramped up his criticism in recent days that Merkel isn’t being straight over the full costs due to German taxpayers. Their opposing positions will be tested on Sept. 1 in Berlin during the only televised debate of the campaign.

Latest Poll

Support for Merkel’s Christian Democratic bloc rose one percentage point to 39 percent in a weekly INSA poll for Bild newspaper yesterday, while her Free Democratic coalition partner also gained a point to 6 percent. Steinbrueck’s SPD and its Green party ally each dropped a point, to 25 percent and 14 percent respectively. The Left Party was down a point at 7 percent. INSA polled 2,128 voters on Aug. 23-26. No margin of error was given.

Steinbrueck, trailing Merkel’s CDU/CSU bloc by 14-19 percentage points in the seven regular polls with less than four weeks before the ballot, sought to leverage comments made on Aug. 20 by Finance Minister Wolfgang Schaeuble that Greece will need more aid, saying they were evidence the government’s crisis policy isn’t working.

The SPD challenger, Merkel’s first-term finance minister, advocates an end to Merkel’s “saving, saving, saving,” and instead urges European structural and cohesion funds to be concentrated on southern Europe, with the proceeds of the proposed Financial Transaction Tax used to create a form of “Marshall Program 2.0.”

Election Probability

The probability of Merkel being able to repeat her current coalition was increased to 55 percent from 50 percent by Holger Schmieding, chief economist at Berenberg Bank in London. At the same time, in a note yesterday he lowered the possibility of a so-called grand coalition of Merkel’s bloc with the SPD to 25 percent from 30 percent.

“Whatever the precise outcome, we believe the German election will not change German euro policies very much,” Schmieding said, citing a 70 percent approval rating among voters for Merkel’s crisis policies and overall backing from the main parties. “Germany helps its partners but sets conditions for its help.”

Merkel, who has repeatedly backed Greek Prime Minister Antonis Samaras and said that she wants Greece to stay in the euro, stressed the importance of Europe to Germany as an export nation and for having delivered more than 60 years of peace.

“That is such a treasure, such a boon, that we can’t place it in doubt,” she said in Rendsburg. “That’s why the euro is more than a currency. For this reason we’ve shown solidarity, but solidarity always linked to responsibility for reforms in those countries that experience our solidarity.”

Merkel, Steinbrueck and Schaeuble are all back on the campaign trail today. Her two former finance ministers will address separate rallies in the city-state of Bremen, while the chancellor is due to speak at 5 p.m. in the cathedral city of Ulm in Baden-Wuerttemberg.

To contact the reporter on this story: Stefan Nicola in Rendsburg, Germany via snicola2@bloomberg.net

To contact the editors responsible for this story: James Hertling at jhertling@bloomberg.net; Reed Landberg at landberg@bloomberg.net