Europe Looks to Merkel of Germany to Revive Economy

BERLIN — Even as the United States economy displays unanticipated resilience, with a healthy jobs report released on Friday, the outlook for Europe’s economy grows ever dimmer. As it does, the pressure builds on Europe’s most powerful leader, Chancellor Angela Merkel of Germany, and her economic team to find a way to get the Continent growing again.

But this puts Ms. Merkel in a bind, as she has to answer to German voters in September when the country holds parliamentary elections. While the European economy may be deteriorating at an alarming rate, the electorate here is still enamored of her as the Iron Chancellor, advocating the austerity policies that are rapidly falling into disfavor elsewhere, among economists as well as the public.

Her response, in recent months, has been to try a delicate balancing act, quietly easing up on crisis-stricken states, giving them more time to narrow their budget deficits, while showing no outward signs of weakness that her political rivals can pounce upon.

But this stance may become increasingly untenable, if the United States’s more stimulative economic policies begin to bear fruit and Europe continues to struggle, as seems to be the case. The European Commission said Friday that the economy of its member nations would shrink by 0.1 percent this year, while the countries that use the euro would contract even more sharply, by 0.4 percent.

And there are signs that the contagion from the south is migrating north and beginning to drag down Germany’s export-driven economy, which is expected to grow by a meager 0.4 percent this year, adding another potential source of voter discontent to Ms. Merkel’s concerns.

So the question now is not just whether Ms. Merkel will further relax her insistence on strict austerity but how far she thinks she can go in an election year, or perhaps how far she needs to go to prop up her own economy. Few experts expect any drastic departures.

“In the end, she’s this sort of Prussian-Protestant determined person,” said Stefan Kornelius, an editor at the Süddeutsche Zeitung and the author of a new book about Ms. Merkel. “She’s not ideological, but she’s truly convinced about the rightfulness of her course.”

But the constant questions about austerity are taking their toll on Ms. Merkel, who has begun to bridle in public when people ask about spending cuts.

“I think budget consolidation is now interestingly labeled with the word austerity, which is otherwise not used in Germany,” Ms. Merkel said this week at a news conference with the new Italian prime minister, Enrico Letta. “In Germany we didn’t even know this word before the crisis.”

Aware of the shifting dynamics in Europe, Ms. Merkel has chosen instead to emphasize the need for structural reforms to the labor markets of struggling countries over slashed spending. And she is not insisting on strict adherence to budget-cutting goals. That may help in the long run but can do little to immediately pull economies out of free fall.

“Her overarching goal right now is to get re-elected, and she won’t get re-elected if she spends German money on French and Italian problems without getting anything in return,” Mr. Kornelius said.

Ms. Merkel is forced to navigate dissension within her own conservative ranks at the slightest wavering from the disciplined German line, and a new party on the right, the Alternative for Germany, pressing for the more extreme step of a breakup of the euro.

To critics, Europe is facing an undeniable economic crisis and Germany is making decisions based on politics. “They are prevaricating all the time and allowing short-term domestic considerations to determine euro-zone policy,” said Charles Grant, director of the Center for European Reform, London.

Critics contend that fiscally solid countries like Germany have already gotten plenty in return and that the narrative of parsimonious Northern Europeans bled dry by profligate southerners is a false one. They have pointed to studies quantifying how Germany has been able to save billions of dollars because lower interest rates for perceived safe havens have made borrowing money dramatically cheaper.

Chris Cottrell contributed reporting.

Greek Protesters Await Angela Merkel on Athens Visit

Ms. Merkel was to meet with Prime Minister Antonis Samaras, President Karolos Papoulias and with Greek and German entrepreneurs on a six-hour visit expected to be accompanied by rowdy demonstrations against Germany’s perceived leading role in pushing Greece to impose more pain on its citizens in exchange for rescue financing.

Eager to give Europe’s most powerful leader a warm and safe reception, Greek authorities are mounting the biggest security operation since 1999 when President Bill Clinton visited Athens amid furious protests at NATO airstrikes against the former Yugoslavia.

Some 7,000 police officers, many brought to the capital from the provinces for the day, will be on standby along with rooftop snipers and protests have been banned in much of downtown Athens.

Security will be particularly heavy outside the Parliament and the German Embassy. The police may resort to the use of water cannons if rallies get out of hand. The precautions reflected the desire of Greece’s fragile coalition government, embroiled in difficult talks with Greece’s so-called troika of foreign lenders on a $17.4 billion dollar austerity package, to contain its citizens’ rage at Ms. Merkel, who has been cast here as the arch-villain of the euro crisis.

Ms. Merkel’s visit comes only days after her main rivals, the Social Democratic Party, announced that Peer Steinbrück would run against her in next year’s general election.

Mr. Steinbrück served as Ms. Merkel’s finance minister in her government from 2005 to 2009, and his party has been more lenient in its discussion of Greece’s future prospects in the euro zone, arguing the time lost by the government between elections earlier this year must be taken into account when considering aid to the country.

The Social Democrats criticized Ms. Merkel’s visit to Athens as coming too late. The chancellor was last in Athens in 2007. Carsten Schneider, a finance expert with the Social Democrats criticized the chancellor in comments Tuesday to ARD public broadcaster as “only giving advice from behind a desk in Berlin” since the outbreak of the crisis in 2009.

Even within Ms. Merkel’s own Christian Democratic party there are differences of opinion on how to handle Greece. While the chancellor has in recent months shifted her rhetoric from stressing the importance of austerity and come out more strongly in favor of keeping Greece in the euro zone, her current finance minister, Wolfgang Schäuble has upheld a tougher line on Athens.

“We want to help Greece to build up an efficient bureaucracy and an efficient economy, but at some point, Greece needs to stand on its own two feet,” Mr. Schäuble told RBB public broadcaster on Monday . “It is pointless to help a bottomless pit.”

Ms. Merkel’s government has said her visit is intended as a clear signal of solidarity with the Greeks and will not interfere with the forthcoming report by the troika of lenders — the International Monetary Fund, the European Central Bank and the European Commission.

Mario Draghi, president of the European Central Bank, told reporters in Brussels on Tuesday that no decisions would be taken on Greece until the report is produced, but he warned that “regarding reforms, more needs to be done” in Greece, Reuters reported.

In Greece, civil servants, including teachers and doctors, are walking off the job for three hours starting at noon to protest Ms. Merkel’s visit and have prepared banners reading “Don’t cry for us Mrs. Merkel” and “Merkel you are not welcome here” to wield during rallies.

Daily speculation in the local media about the outcome of Greek negotiations with the troika, aimed at securing a $40.8 billion dollar loan without which the country faces default in late November, was eclipsed on Tuesday by anticipation of the German leader’s visit.

Headlines in center-right newspapers read, “A message of support,” “A decisive visit by Merkel” and “We are staying in the euro.” Others, more skeptical, declared “Merkel is bringing no gifts” and “A day of anger.”

This anger was echoed by a nurse heading into the center to join fellow protesters. “This is pure provocation, we have to answer back,” said the nurse, Christina Amanti, 37. “It’s like she’s visiting her protectorate. What’s she going to do, pat us on the back and tell us to keep getting poorer, that it’s good for us?”

Melissa Eddy contributed reporting from Strasbourg, France.