The future of Europe, or the future of the Iron Chancellor?

IN what will be a defining moment for Europe, the German Chancellor Angela Merkel will today find out whether the lower house of the German parliament, the Bundestag, will green light the country’s €22.3 billion share of the €110bn bailout of Greece.

Her task was not made any easier yesterday with the forecast of a massive fiscal hole thanks to a drop in the country’s projected tax take and news that a group of retired university professors are getting ready to challenge the loan in the constitutional court.

The vote is, however, expected to go through, and be passed in the upper house, the Bundesrat, before being signed into law by President Horst Koehler.

The cost to her Chancellorship could be significant, however, as Ms Merkel stands to lose out in the North Rhine Westphalia (NRW) state election on Sunday – which would mean she loses her majority in the country’s federal council.

With 18 million people, a quarter of the German population, NRW is the largest of the 16 federal states, so has the maximum 6 votes of the 69 in the Bundesrat. The house co-decides legislation with the Bundestag and can stop any law in its tracks.

According to a poll this week, her handling of the Greek crisis lost her vital support in the region. Now the predicted drop in Germany’s income of about €39 billion from 2011 to 2013 will play into the hands of those who believe the hard-working Germans should hold onto their own money and let the Greeks suffer for their profligacy. It will also mean she will have to renege on her election promise to cut taxes as Germany’s budget deficit is forecast to be at least 5% of GDP this year, well above the EU’s 3% rule.

Ms Merkel made one of her most spirited speeches in parliament as she tried to convince MPs to vote for the Greek package in a turnabout – she blocked the move at EU level for the past few months and many believe added to the Greek debt and crisis.

“It’s what happens when tactics turn into policies,” said an EU diplomat referring to what was originally seen as Ms Merkel’s attempt to keep the voters of the normally left-leaning North Rhine Westphalia sweet.

“This is about nothing less than the future of Europe,” she said of the Greek package in the Bundestag.

But it could also be about the future of the Iron Chancellor.