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Setting a common agenda in Berlin and Washington

Chancellor Angela Merkel’s warm reception at the White House on Friday should put to rest lingering doubts about her rapport with US President Barack Obama and its impact on the transatlantic agenda, writes Dr. Jackson Janes, executive director of the American Institute for Contemporary German Studies at Johns Hopkins University.

Setting a common agenda in Berlin and Washington
Photo: DPA

President Obama’s decision to welcome Chancellor Merkel to the White House should be understood as a signal that he wants and needs Germany’s help to pursues his ambitious agenda.

It’s a good bet Merkel will remain chancellor after the German national elections in late September – either in another grand coalition or a government supported by the pro-market Free Democrats. But as far as German-American relations go, the coalition will not matter as much as the chancellor’s management of a relationship with this president. Though more complicated than with his predecessor, it could also yield positive results for Berlin and Washington. These two political leaders share a number of traits that can lead to an effective relationship – if they can keep their domestic politics under control.

There has been a good deal of speculation in German and American press that relations between the president and the chancellor are full of tension. He is supposedly still angry about Merkel blocking him from speaking in front of the Brandenburg Gate in Berlin last summer; she is supposedly angry about Obama’s response to the recession. He wants more German troops in Afghanistan; she wants more regulations of banks.

In reality, it’s time to take a breath. The facts are that Obama and Merkel share not only some important goals, but also some character traits that can make them strong partners in the coming years.

Above the fray or simply more powerful?

Not since John F. Kennedy visited Berlin 50 years ago has a US president enjoyed the popularity Obama has in Germany. That popularity cannot be matched by any German politician – except for Merkel. Like Obama, the chancellor has been very talented at using her personal popularity to manage a noisy and, at times, clumsy government. Critics accuse Merkel of staying above the fray of political battles in order to protect her public image. Obama hears the same accusations. But the fact is both leaders are far more powerful than their opponents. They see similar ways of going after challenges to get a preferred outcome. Both are pragmatic and very good at figuring out where the best deal can be made. The question is: can they do that together in dealing with major foreign policy challenges?

What do these two figures need from each other now? Both are in troubled economic waters at home. German voters in September, as well as American voters in November 2010, are going to opine how those challenges are being met. Merkel has been very critical of U.S. fiscal policies while voices out of the White House have been returning the favour when it comes to Germany’s slower response to the recession. The fact is we are in unchartered territory in this mess and are all looking for benchmarks to measure success. But the world’s largest and fourth-largest economy, which is also the leading exporter nation, need to be taking the lead in forging new strategies to deal with the worst crisis seen in 70 years. Washington and Berlin working together can help find them. That is the first thing they need to agree on.

Setting high goals in foreign policy

Obama has set several high bars for himself on the foreign policy front in Afghanistan, Iran, climate change and improving relations with Russia. Germany’s capacity to help reach those bars is a mixed picture.

While Germany is the third largest military presence in Afghanistan, Merkel has expressed no desire to add significantly to it given the national antipathy to that war. Yet Germany can contribute significantly in rebuilding Afghan society with aid, police-training and development support. However, Merkel has some domestic homework to do in getting more resources for those purposes, especially in light of recent German troop deaths. Once the election is over in late September, she needs to be making the case at home, and more importantly, she needs to discuss with Obama how to coordinate that.

When it comes to Iran, Germany is its largest trading partner in Europe. It can certainly use that leverage to put pressure on Tehran, more so than anyone else dealing with the nuclear issue or in the wake of the turmoil there after the elections. Merkel has been more outspoken on the post-election crackdown in Tehran than Obama. But it remains to be seen if Merkel will go beyond public outrage.

As the global leader in wind power, Germany can act as a leader of climate change and energy security. As Obama turns his focus to energy policy, he can use German influence as a respected leader in climate change to coerce developing countries like China and India to commit to stringent targets, a necessary commitment for further US action. In fact, Merkel met Friday with House Speaker Nancy Pelosi to discuss opportunities for transatlantic cooperation, and success here can lead to better cooperation on other fronts, like Russia.

In the case of Russia, there is no more important country in Europe for Moscow than Germany. US goals with Russia are mainly strategic, for example gaining traction in arms control and non-proliferation, whereas German aims have more to do with energy policies and developing a relationship between Russia and the EU. There is lots of room for transatlantic friction if Berlin and Washington cannot calibrate their approaches carefully. As Obama prepares for his trip to Moscow, he will find no better counterpart in Europe to discuss how to size up Moscow than Merkel.

A reliable partner for Obama

Berlin and Washington have always argued, sometimes rationally, sometimes emotionally, about challenges. That will no doubt continue, no matter the leaders. American and German democracies are loud and complicated, as are most healthy ones. For Obama, Merkel remains one of the few reliable players on the political stage in Europe. Great Britain is in turmoil, French President Sarkozy is unpredictable, and the remaining leaders are less influential than the chancellor. For Merkel, Obama’s popularity in Germany can be an important asset for her next term, assuming she gets another term and assuming they can work together in setting a shared agenda. For Obama, having a steady partner in Germany will help steer Europe to his benefit.

The rumours of tense relations between these two leaders have more to do with domestic politics in their respective climates than their actual interest in working together. Rather, both understand the opportunity ahead that can enable their mutual success over the next several years. This meeting at the White House is merely the first of many steps towards that success.

Click here for more from the American Institute for Contemporary German Studies.

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ECONOMY

German consumer prices set to rise steeply amid war in Ukraine

Russia's war in Ukraine is slowing down the economy and accelerating inflation in Germany, the Ifo Institute has claimed.

German consumer prices set to rise steeply amid war in Ukraine

According to the Munich-based economics institute, inflation is expected to rise from 5.1 to 6.1 percent in March. This would be the steepest rise in consumer prices since 1982.

Over the past few months, consumers in Germany have already had to battle with huge hikes in energy costs, fuel prices and increases in the price of other everyday commodities.

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With Russia and Ukraine representing major suppliers of wheat and grain, further price rises in the food market are also expected, putting an additional strain on tight incomes. 

At the same time, the ongoing conflict is set to put a dampener on the country’s annual growth forecasts. 

“We only expect growth of between 2.2 and 3.1 percent this year,” Ifo’s head of economic research Timo Wollmershäuser said on Wednesday. 

Due to the increase in the cost of living, consumers in Germany could lose around €6 billion in purchasing power by the end of March alone.

With public life in Germany returning to normal and manufacturers’ order books filling up, a significant rebound in the economy was expected this year. 

But the war “is dampening the economy through significantly higher commodity prices, sanctions, increasing supply bottlenecks for raw materials and intermediate products as well as increased economic uncertainty”, Wollmershäuser said.

Because of the current uncertainly, the Ifo Institute calculated two separate forecasts for the upcoming year.

In the optimistic scenario, the price of oil falls gradually from the current €101 per barrel to €82 by the end of the year, and the price of natural gas falls in parallel.

In the pessimistic scenario, the oil price rises to €140 per barrel by May and only then falls to €122 by the end of the year.

Energy costs have a particularly strong impact on private consumer spending.

They could rise between 3.7 and 5 percent, depending on the developments in Ukraine, sanctions on Russia and the German government’s ability to source its energy. 

On Wednesday, German media reported that the government was in the process of thrashing out an additional set of measures designed to support consumers with their rising energy costs.

The hotly debated measures are expected to be finalised on Wednesday evening and could include increased subsidies, a mobility allowance, a fuel rebate and a child bonus for families. 

READ ALSO: KEY POINTS: Germany’s proposals for future energy price relief

In one piece of positive news, the number of unemployed people in Germany should fall to below 2.3 million, according to the Ifo Institute.

However, short-time work, known as Kurzarbeit in German, is likely to increase significantly in the pessimistic scenario.

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