* CDU congress hails German strength as euro crisis deepens
* Minimum wage, education debates elicit more interest than
* Merkel message on solidarity fails to sink in
* Italian, Spanish borrowing costs rise in new threat to
By Noah Barkin and Stephen Brown
LEIPZIG, Germany, Nov 15 The debt crisis
sweeping southern Europe and lapping France is cause for alarm
in Washington and Beijing, but not it seems for the rank and
file of German Chancellor Angela Merkel's party.
On the contrary, at a meeting of Merkel's Christian
Democrats the mood among delegates ranged from triumphalism over
Germany's economic strength to complacency about the crisis and
blind faith in Berlin's ability to shield Germany from it.
Merkel warned on the first day of the congress on Monday
that Europe faced what could be its "toughest hour since World
War Two". But her message didn't register with many of those in
the hall or with the German media. Much press coverage focused
on domestic issues - the minimum wage, childcare and education.
"We're dancing on a volcano," said Oswald Metzger, a CDU
delegate from Baden-Wuerttemberg who is deputy leader of the
party's small and medium-sized business wing.
"Many of the people walking around here in Leipzig are
divorced from the real economy and don't understand the euro
crisis nor the risks we face."
Figures published on Tuesday showed the German economy grew
0.5 percent pace in the third quarter. Unemployment has fallen
to its lowest levels since German reunification in 1990 and the
smaller "Mittelstand" firms that form the backbone of Europe's
largest economy have strong order backlogs.
Many say they are not yet feeling the crisis that is
hammering Greece, Portugal, Italy and Spain.
The sense of invulnerability was fuelled by Germany's
rebound from the global financial crisis. After suffering its
worst annual post-war contraction in 2009, the economy bounced
back sharply in 2010 on the back of robust exports and
government subsidies that discouraged firing.
"Germany always comes out of a crisis well simply because we
have competent leaders," said Eva Maria Meister, a social worker
who runs a home for problem teenagers in Potsdam and spoke
briefly with Merkel during her tour of the conference centre.
"Merkel is always right. That's just the way it is."
EUROPE SPEAKS GERMAN
The speakers in Leipzig contributed to the complacency,
focusing more on Germany's strengths than the risks posed by the
Volker Kauder, who leads the CDU in parliament, told
delegates that they should be proud of Germany's resilience,
sparking loud applause.
"Germany will continue to be the motor of Europe. We will
continue to compete, to create jobs -- we are the ones that have
done things right in this time of crisis," Kauder said.
A debate on education policy that followed his speech
elicited much stronger reactions from the audience in the vast
conference room than Monday's discussion on the euro crisis.
Asked by Reuters about the risks to Germany from the crisis,
many delegates turned the discussion around, saying countries on
the euro zone's southern periphery must solve their own problems
by following the German model of fiscal discipline.
"Europe is speaking German all of a sudden, not the language
but in acceptance of the policies that Angela Merkel has fought
for so long and so successfully," Kauder said.
The reality seems quite different. Roughly 40 percent of
German exports go to fellow euro zone members and a full 60
percent to partners in the broader 27-nation European Union.
The Mannheim-based ZEW economic think tank said weakening
global trade and public debt problems in the euro zone and
United States posed a major threat to German business activity.
"These risks could gain even more importance and thus could
further harm economic growth in Germany," ZEW President Wolfgang
Merkel tried to reinforce this message on Monday, telling
delegates that Germany's own well-being was inextricably linked
to the stability of the euro zone.
While delegates grudgingly accepted Merkel's message that
Germany should accept closer European integration, they made
clear this must be done on German terms.
Bolder steps to end the crisis -- from joint euro zone bonds
to stronger steps from the European Central Bank -- were
rejected by many out of hand.
It was unclear whether Merkel did enough in Leipzig to
explain to the CDU rank and file what Germany must do to shore
up Europe's single currency and preserve its own prosperity.
Italian bond yields have spiked back above 7 percent -- a
level which is widely seen as unsustainable. In Spain, borrowing
costs reached their highest level in 14 years. And France,
Germany's biggest trading partner, is far from immune.
"It's not cosmetic surgery but emergency medical aid that
needs to be applied," said Peter Bofinger, a member of Germany's
"wisemen" panel of economic advisers to the government.