* Merkel urges step-by-step move towards political union in
* Delegates say no alternative but to accept more
* Shift on minimum wage designed to position Merkel for 2013
By Noah Barkin and Stephen Brown
LEIPZIG, Germany, Nov 14 - Warning that Europe faced
its "toughest hour since World War Two", German Chancellor
Angela Merkel urged her party to set aside its misgivings about
the euro and accept closer political integration as a solution
to the bloc's deepening debt crisis.
In a one-hour address to thousands of delegates from her
Christian Democrats (CDU), Merkel offered no new ideas for
resolving the crisis that has forced bailouts of Greece, Ireland
and Portugal, and stirred doubts about the survival of the
13-year-old currency area.
But she said Germany, which as Europe's largest economy has
provided the biggest share of the aid to stricken euro states,
would have to make more sacrifices in the months ahead.
"The challenge of our generation is to finish what we
started in Europe, and that is to bring about, step by step, a
political union," Merkel told the party congress in the east
German city of Leipzig.
"Europe is in one of its toughest, perhaps the toughest hour
since World War Two," she said.
The two-day party meeting was originally supposed to focus
on education policy but Europe's debt crisis has dominated
headlines for months and thrust itelf into the centre of the
Last week alone, the leaders of Greece and Italy were forced
out and replaced with technocratic governments charged with
pushing through tough austerity measures.
Merkel does not face an election until 2013, but knows that
she too could become a victim of the euro zone turmoil if she
puts a foot wrong.
"If the euro fails, then Merkel will fail. That's pretty
clear," Said Juergen Dierks, a 57-year old CDU delegate from
Lower Saxony who described her speech as solid.
Asked about Merkel's demand that the party accept "more
Europe", he answered: "We all know there is no other choice."
VOLUNTARY EURO EXIT
Under former Chancellor Helmut Kohl, the CDU led Germany
into the euro.
Nearly 13 years on, many German conservatives are uneasy
with taxpayer-funded bailouts of weak euro states, resentful of
fiscal backsliding in countries like Greece and concerned the
crisis is impinging on the independence of the European Central
Bank, which has been forced to buy up bonds of stricken states.
Some in the party believe the whole project was a mistake
which must now be carefully undone, with Greece and possibly
other countries exiting the bloc.
A resolution put forward by the party leadership in the
run-up to the Leipzig congress states explicitly that countries
that repeatedly violate Europe's fiscal rules should be allowed
to leave voluntarily.
But Merkel argued that Germany had a responsibility towards
its partners and was vulnerable itself if other euro zone states
were allowed to collapse, noting that 60 percent of German
exports go to the European Union.
"Irish problems are Slovak problems, Greek problems are
Dutch problems and Spanish problems are our problem," Merkel
said. "Our responsibility does not end at our borders."
Merkel said there were "red lines" Germany was not prepared
to cross, rejecting joint euro zone bonds and other quick fixes
which Germany believes could discourage euro states from running
responsible fiscal policies.
"The hard part is that this crisis was not created
overnight. It is the result of decades of mistakes, and we can't
solve it in one fell swoop. We have a long, tough road ahead of
us," she said.
WORLD IS WATCHING
Dietrich Birk, a 44-year-old member of the state assembly in
Baden-Wuerttemberg, was broadly positive about Merkel's speech
though he said it lacked real passion.
"There is a lot of uncertainty in the party. People are
tense. They're worried about the impact of the crisis on the
real economy, which we haven't really felt yet in Germany," he
It is not only Merkel's euro policy which has sparked
concern in CDU ranks. After the Fukushima disaster in Japan
earlier this year, Merkel abandoned the party's long-standing
support for nuclear power, enraging the CDU's business wing.
Last month she made another about-face, backing the
introduction of a nationwide minimum wage, a policy she had
publicly opposed for years.
Merkel defended both decisions in her speech, receiving
tepid applause. The reversals are part of a deliberate strategy
by Merkel to co-opt the positions of rival parties, as she did
on evironmental and family policy in her first term, and
increase her coalition options for 2013.
Because of a precipitous slide in support for her current
partner the Free Democrats (FDP), forming coalitions with the
left-leaning Social Democrats (SPD) or Greens may be her only
hope of retaining power.