MADRID (Reuters) - Like the coming of the messiah, depressed southern Europe nations await Angela Merkel’s likely victory in Germany’s September election with a mixture of hope and trepidation.
Four years into the euro zone debt crisis, people in debt-laden Spain, Italy, Greece, Portugal and Cyprus are deeply worried that a third term in power for the conservative chancellor may only bring them more austerity and pain.
The five countries that implemented Merkel’s anti-crisis recipes and cut spending massively in areas such as health and education, have been in or close to recession since 2008. Unemployment tops 27 percent in Spain and Greece.
Their leaders, however, disagree. Confident that Merkel will tone down her budget cutting mantra and accept more burden-sharing within the euro zone, they are positioning themselves as close allies of Europe’s main paymaster.
“I think we will see a different Mrs Merkel after the elections,” said Cypriot President Nicos Anastasiades, echoing a view shared by most of his fellow southern European leaders.
In Greece, where crunch time for plugging a budget gap with a third bailout of the country starts at the end of September, hopes are high that debt issues can finally be sorted out after the German election, maybe through a new debt write-off.
In Italy and Portugal, where austerity has not yielded many positive results, policymakers believe Merkel will accept a more balanced model for managing the economic crisis if she wins.
In Spain, where banks were rescued with 42 billion euros of European money, expectations are that the chancellor will lean towards common euro zone debt issuance and accept a full-fledged banking union, unlocking credit in the recession-hit nation.
While market turmoil has eased in the euro zone and last year’s massive capital outflows from southern Europe to safe-haven Germany have started to reverse, more needs to be done.
The correction pace of imbalances in the European Central Bank’s Target 2 cross-border payments system, a key indicator of financial stress within the single currency zone used by ECB President Mario Draghi to monitor monetary policy, remain slow.
Continued German support will be key to keep the fever down.
Senior government sources in these countries insist Merkel has signaled flexibility on these issues in recent private talks. But she has given no public indication of such a U-turn and many in Berlin caution it is highly unlikely to happen, warning against wishful thinking.
“Many people are waiting for the elections then hope, expect ... a change in the German position. This is not what I would expect,” German European Central Bank executive board member Joerg Asmussen told Reuters in an interview this month.
Noting that other countries such as the Netherlands, Finland, Slovakia and Estonia shared Berlin’s doubts, he said: “It’s easy to hide behind Germany... It’s a group of countries, it’s not only Germany.”
What’s more, a good part of Merkel’s post-election crisis response will depend on which party she needs to team up with to secure a majority.
Anastasiades, Portugal’s Pedro Passos Coelho, Italy’s Enrico Letta, Spain’s Mariano Rajoy and Greece’s Antonis Samaras share a common appetite for closing ranks behind Merkel as she tops the polls 60 days to the vote.
Earlier this month, they flocked to Berlin to cheer her at a summit on youth unemployment in Europe which many saw as a mere political show for her campaign.
Centre-right governments in Spain, Portugal, Greece and Cyprus hope to bank on a new political landscape in the European Union after the departure of France’s Nicolas Sarkozy and Italy’s Mario Monti, Merkel’s closest allies in the continent.
New French President Francois Hollande and Italian Prime Minister Letta, both from the centre-left political family, while working on their relations with Merkel do not enjoy the close ties of their predecessors.
“Hollande will always be there of course but Germany needs a very strong ally in the south and that should be us,” said a senior Spanish government source who talked to Reuters on condition of anonymity. “No effort should be spared in gaining this place we already enjoyed in the nineties.”
Rajoy is not alone in pushing this line. Samaras, Passos Coelho and Anastasiades are also jockeying for a “special relationship” with Merkel which they say will help secure their countries better bailout deals.
Although results have been limited, they intend sticking to their game plan after the September 22 elections.
“Irrespective of how harsh she was towards us, she is a capable leader both of Germany and of Europe,” Anastasiades said, adding that Merkel’s leadership was behind recent successes by the euro zone in tackling the debt crisis.
But while politicians, businessmen and bankers are convinced different winds are blowing in Berlin, ordinary citizens have yet to be persuaded.
The efforts deployed by Merkel and her finance minister Wolfgang Schauble to support governments in the struggling countries and restore Germany’s damaged public image have had little or no effect so far.
The dominant feeling remains that Germany was too slow to respond to the debt crisis and when it did, it pursued only national objectives such as indirectly bailing out its banks exposed to southern Europe, and shielding its own taxpayers.
An anti-Merkel sentiment has grown in these nations as she imposed unpopular austerity policies in return for financial support, adding to historical animosity towards Germany dating back from World War Two.
“I just hope it’s not true that treating us badly makes her more popular in Germany,” said Teresa Reis, a technology student in Lisbon. “That would mean something is seriously wrong with Germany and Europe. But anyway, we all need better leaders and I hope Germany gets one too.”
The tune is the same in Athens where, on the occasion of Schauble’s visit last week, a group of women unfolded Greek flags and chanted “Nazi, Nazi” outside the finance ministry.
One of the protesters, 34-year old Efi Anestopoulou who has been unemployed since the crisis began, told Reuters: ”I’ve been unemployed for three years and my pockets are empty. I don’t even have money to buy food.
“I didn’t rob anyone, I didn’t steal any money to deserve this... It’s our politicians who don’t want us to revolt against the German visitor,” she said in a trembling voice, showing her empty pockets to a policeman trying to disperse the small group.
Additional reporting by Renee Maltezou in Athens, Michele Kambas in Nicosia, Andrei Khalip in Lisbon and Naomi O'Leary in Rome; Editing by Paul Taylor