In German election debate, Merkel vows to keep reform pressure on Greece, Steinbrueck labels crisis policy a ‘failure’

Chancellor Angela Merkel and her Social Democratic challenger Peer Steinbrueck sparred over the debt crisis and Germany’s economic outlook in the only televised debate of the campaign for Sept. 22 federal elections.

Steinbrueck sought to score points against the chancellor on the crisis that dominated her second term, saying he’d shift away from her application of austerity in “deadly doses” to southern Europe. Merkel, who said for the first time that Greece may need more aid, countered that narrowing bond spreads in the euro area show her course is right for Europe and for Germany.

Germany needs “a new beginning,” Steinbrueck, Merkel’s first-term finance minister, said during last night’s 90-minute debate in Berlin. “We’ve been standing still for four years. A lot of things didn’t get done.”

Three weeks before the vote that will determine who takes the helm of Europe’s biggest economy, Steinbrueck went on the offensive as he tried to narrow a poll lead of 15-19 percentage points held by Merkel’s Christian Democratic bloc. Spot polls taken after the debate were split on the winner.

“It was roughly even, which at the very margin is good news for Steinbrueck,” Holger Schmieding, chief economist at Berenberg Bank in London, said in a telephone interview. “His personal popularity gap to Merkel, which is huge, may narrow a bit. But I don’t think this will be a major game-changer for party preferences.” Merkel “is not the most charismatic person, but in a way many Germans like her that way.”

A Forsa poll for RTL television taken immediately after the debate showed Merkel the winner by 44 percent to 43 percent for Steinbrueck. An FG Wahlen survey of 1,188 viewers had 40 percent for Merkel and 33 percent for Steinbrueck, with 27 percent saying there was no difference. An Infratest poll for ARD television gave Steinbrueck 49 percent to Merkel’s 44 percent.

“We’ve had four good years for Germany and I hope the next four also will be good ones,” Merkel said.

The two candidates jousted over pensions, the NSA spying affair, Germany’s energy shift, taxes and minimum wages. They frequently interrupted the four moderators while largely refraining from personal attacks on the other.

Merkel championed her steering of Germany through the crisis that spread from Greece, saying her stance of tying aid to conditions forces the euro area to become more competitive.

The German economy is “strong” with more in employment than ever before and higher tax revenue than at any time, she said, warning that Steinbrueck’s platform of tax increases threatened to put German prosperity at risk.

“We can ensure the economy continues to move upwards,” Merkel said. “Naturally the job isn’t over. Naturally there are many worries and problems, but we have demonstrated that we can cope in a difficult period.”

Some of the sharpest clashes came on the subject of Europe, a topic that had played only a small role in the campaign until a debate flared late last month over whether Greece might require a third bailout after the German vote.

Steinbrueck said that Merkel was applying austerity in “deadly doses” to southern Europe and that far more emphasis must be placed on bolstering economic growth and stemming record unemployment. Referring to a program to tackle youth joblessness announced by Merkel earlier this year, he said “the question is what’s come of it.” There is “only the savings club battering Greeks over the head.”

Steinbrueck dismissed Merkel’s European policy as a “failure” because of continued recession and sky-high unemployment in the southern euro countries that have had to swallow deep spending cuts in exchange for bailouts.

“I would have followed a different crisis strategy. Of course there must be budget consolidation in these countries, but not a deadly dose,” Steinbrueck said.

“Germany once got help too and we must not forget that,” he said. “Germany was massively helped after the Second World War with the Marshall Plan.”

Merkel retorted that it was under SPD chancellor Gerhard Schroeder that Greece had been allowed to join the euro in the first place.

In Germany, the election campaign has been dominated by the euro-area debt crisis and its impact on the region’s economy since Aug. 20, when Finance Minister Wolfgang Schaeuble said that Greece will need more money. Steinbrueck said more Greek aid shows the government’s crisis strategy isn’t working.

Merkel rebutted the charge, citing the “fortunate” rise in German bond yields and lowering of yields in other states as evidence “that the euro area is becoming more competitive.” While signaling that her policy wouldn’t change in a third term, she echoed Schaeuble on Greece’s aid needs. Schaeuble is due to brief parliament’s Budget Committee on Greece in Berlin today.

“Nobody knows precisely how things will develop in Greece,” Merkel said. “My job as chancellor is to ensure that the reform pressure on Greece doesn’t let up.” She said “it’s possible that there will be a new aid package for Greece. Nobody knows how big.”

Steinbrueck asked “whether, with the announcement of a third Greek package, we shouldn’t admit to ourselves that the crisis strategy to date — largely put forward by this government — has failed.” He argued that “what is lacking is a rebuilding program, what is lacking is a growth impulse, what is lacking is the fight against youth unemployment.”

“I would have said, of course there must be consolidation of public budgets — but please not in a deadly dose for these countries,” he said.

Merkel noted that Steinbrueck’s Social Democrats have voted for the various measures she has put forward in the crisis — including a European budget-discipline pact — and insisted that her approach is the way to fix the eurozone’s troubles.

“Do we help by expressing regret about the difficult situation in these countries, or do we help by encouraging them to conduct the necessary reforms?” she asked.

“What is important now is not to show false solidarity, but to follow a principle — and this principle is … solidarity and responsibility, and if we do not follow this through we will see that these countries don’t regain more jobs,” she said. Merkel pointed to efforts that have been made to encourage growth in Europe.

Support for Merkel’s Christian Democratic Union and its CSU Bavarian sister party dropped a percentage point to 39 percent in an Emnid poll for Bild am Sonntag newspaper yesterday. Her Free Democratic coalition partner gained a point to 6 percent. Steinbrueck’s SPD dropped two points to 23 percent and its Green party ally had 11 percent, down a point. The Left Party had 10 percent, up two points. Emnid polled 1,851 voters on Aug. 22-28. No margin of error was given.

“Both had strong and robust moments” in the debate, producing no clear winner, Jan Techau, director of the Brussels office of the Carnegie Endowment, said by phone. “Steinbrueck needed a very clear victory to get out of his slump and he didn’t score that victory.”

[Combined reports]