Germany's Merkel: Will she save the euro or seal its demise?

'Baffling given the recent behavior of the markets'

The unwillingness to heed the advice of many of her European peers puzzles some observers. “It is really difficult to understand what drives Merkel and her finance minister, Wolfgang Schäuble,” says Bofinger. “I think they have a very strong belief in the rationale of the markets. They believe markets will reward budget consolidation, which is baffling given the recent behavior of the markets.”

A closer look at Merkel's life will offer some insight into her actions, argues Merkel's biographer. “Merkel is a scientist, a trained physicist who entered politics at the age of 36,” says Margaret Heckel. “Unlike with most career politicians her approach to politics is [not] emotional, it is analytical.”

Ms. Heckel believes that Merkel has a long-term perspective on the eurocrisis. “Merkel uses the European Union as a vehicle to prepare Germany for the economic challenges coming from Asia and the emerging markets," she says. "Only if the EU as a whole becomes much more dynamic and competitive, it can preserve its position vis-à-vis the US and China.”

Merkel’s opponents argue that her proposals, a fiscal union that enforces strict budgetary discipline on its members and imposes automatic sanctions on those who don’t stick to the rules, can only have an impact in the medium term, and that what is needed is swift action now – if it is not too late already.

“She’s ruined us,” writes Wolfgang Münchau, columnist for the Financial Times and for Spiegel magazine, in a recent Spiegel opinion piece. “Her hesitancy and constant opposition to proposed solutions have earned her and us the opposite of what she set out to achieve: It’s going to be extremely costly for Germany. No matter what the outcome." 

Did she underestimate the crisis?

There is another possibility, some analysts say: Merkel might have underestimated the extent of the crisis. When Greece started to slide toward insolvency she acted for a long time as if it was an isolated problem that needed no outside intervention. And the ripple effect of the March 2011 nuclear power catastrophe in Fukushima, which caused a U-turn in Germany’s energy policy and led to the decision to shut down the country’s reactors by 2022, was at the top of Merkel’s priority list for several months while the eurocrisis deepened.

But biographer Heckel thinks that Merkel’s scientific background and the fact that she grew up in East Germany make her the politician Europe needs now.

“She is an incredibly fast learner," she says. "Coming from the East she looked at West Germany and quickly took in the advantages, but also the faults of the system. And as a scientist she is used to trial-and-error. For her Plan B is just as legitimate as Plan A.”

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