Analysis: German tempers fray as U.S. policy gulf widens

BERLIN (Reuters) - Germany’s undiplomatic outbursts against U.S. policy, calling it “clueless” before a G20 summit, show growing estrangement on economics as America’s focus shifts away from transatlantic ties to domestic challenges and Asia.

“The Atlantic is getting wider,” said Anton Boerner, head of Germany’s Foreign Trade Association, who spoke of a “creeping alienation” between America and Europe, which has been exacerbated by the global financial crisis.

Germany and the United States often criticize each other’s approaches to aiding economic recovery, with U.S. calls for more expansive policy falling on deaf ears in fiscally disciplined Germany. But Berlin has taken the rhetoric to a new level.

Finance Minister Wolfgang Schaeuble, 68, said last week that the U.S. Federal Reserve decision to buy $600 billion of government bonds undermined U.S. credibility and was “clueless.” There was no point, he said, in pumping money into the markets.

China and Brazil were among those echoing his comments but U.S. officials were particularly stung by Schaeuble and German Economy Minister Rainer Bruederle saying the Fed move amounted to “indirect manipulation” of the dollar to boost exports; this at a time when Washington is criticizing China for exactly the same kind of strategy.

“It’s not acceptable for the Americans to criticize China for currency manipulation then slyly help the dollar by printing at the Federal Reserve,” Schaeuble told Der Spiegel magazine.

Coming ahead of a G20 summit in Seoul where nerves about trade and currency imbalances will top the agenda, the comments were strong even compared to the frank tone that U.S. Treasury Secretary Timothy Geithner uses with the Germans and others.

“The harsh tones betray major nervousness among top decision makers,” said Boerner. “The effects of the financial crisis have made them insecure and afraid.”

Fed Chairman Ben Bernanke says buying government debt to boost the U.S. economy is important for global growth.

But Chancellor Angela Merkel and her minister “think pretty much alike” even if her language is more moderate, said a German government source. She refrained from using names, for example, when she criticized policy keeping currencies artificially low to boost exports as short-sighted.

Simon Green, a history professor at Aston University in Britain, said the Americans’ quantitative easing was a “red flag” to the Germans with their historic fear of inflation.

Germany has made a painful effort to get competitive in the past decade of slow growth and stagnant wages and is unhappy to see “the Americans saying ‘let’s throw on the press, print money and get competitive that way,’” said Green.


One regional German paper, the Hannoversche Allgemeine, came to the conclusion that “never before has the Merkel government had such a direct confrontation with the United States.”

Merkel’s center-left predecessor Gerhard Schroeder came into conflict with President George W. Bush for criticizing the war in Iraq. The arrival of conservative Merkel raised great hopes in Washington and she got on well personally with Bush.

But the chancellor and Bush’s successor Barack Obama have always had a difficult time communicating, said William Drozdiak of the American Council on Germany.

While they broadly agree on many geopolitical issues like Iran and Afghanistan, there are differences in the approach to security and, most significantly, Merkel has doggedly refused U.S. overtures to fire up domestic economic demand in Germany.

“On economic policy there is no dissonance with Europe as a whole, but rather with successful EU states like Germany,” said Hans-Ulrich Klose, head of German cooperation with Washington and deputy head of parliament’s foreign affairs committee.

After his mid-term election defeat, Obama’s priority is to boost jobs via exports by whatever means, said Klose, who while stressing the shared values and Obama’s popularity in Germany, sees Washington with “a quietly protectionist frame of mind.”

U.S. diplomats are trying to convince Germany “Europeans are the best partner the U.S. could have,” as Assistant Secretary of State Philip Gordon said on a recent visit to Berlin.

“But the danger is that anti-American sentiment in Germany could grow,” said Klose.

At the Center for American Progress in Washington, Michael Werz said U.S.-German tensions reflect difficulties adjusting as Asia and other developing areas outstrip Europe and America in economic and demographic growth and divert their attention.

“The census shows the U.S. population’s center of gravity is shifting 20 meters a day away from the north-east toward the south-west due to immigration from Asia and the South,” he said.

On top of that, Obama lacks the instinctive European focus of some of his predecessors like Bill Clinton, said Green. But it is also “part of a mature bilateral relationship to recognize the fact that they are not exclusively focused on each other.”

Writing by Stephen Brown; Editing by Ralph Boulton