The year did not start well for Germany's Chancellor Angela Merkel. On January 4, Mario Draghi, the president of the European Central Bank, appointed the Belgian Peter Praet to be the ECB's chief economist. Merkel's candidate, the German Jörg Asmussen, did not get the job although Merkel had intended him to replace his compatriot Jürgen Stark, the previous ECB chief economist.
Ever since the establishment in 1998 of the ECB, the central bank of the eurozone, the group of countries using the euro as their currency, its chief economist has been a German. Germany is the largest country and strongest economy in the eurozone. The ECB chief economist decides the interest rate in the eurozone. For Germany, a country which for historic reasons fears inflation, a German setting the interest rate was a reassuring thought.
When Stark announced last September that he would resign because he disagreed with the ECB policy of buying sovereign bonds from ECB member states in financial difficulties, Berlin was confident that its candidate would succeed him. However, French President Nicolas Sarkozy demanded that the Frenchman Benoit Coeuré be given the job. Draghi opted for a compromise.
Draghi made Coeuré responsible for the ECB's market operations and Asmussen for its legal department and international relations. Coeuré can decide to expand the program of buying sovereign bonds, but Asmussen has the power to block such a program if he deems it in violation of the ECB's legal rules.
The sensitive job of chief economist was given to Praet, a citizen of Belgium, a country conveniently situated between Germany and France. It is often seen as mediator between its two big neighbors, although politically it is one of France's closest allies. Praet, however, was born in Germany in 1949 of a German mother and a French-speaking Belgian father, who was a military surgeon in a Belgian army unit stationed in Germany.
There is no doubt that if Praet had not been half-German, it would have been much harder for Merkel to accept that the ECB's chief economist, for the first time, is not one of Berlin's own appointees. For all the talk of European solidarity and the ambition of the European Union to become a genuine "United States of Europe," the EU still is an organization in which national interests prevail, and decisions, including appointments for technocratic top jobs in the common institutions, can only be taken as part of an elaborate political compromise.
Perhaps if Merkel had not been distracted by another issue, she would have put up a harder fight to make Asmussen chief economist. The appointment of a non-German to the post has set a dangerous precedent which Germany would have preferred to avoid. However, Merkel's major political worry at the moment is domestic.
Since mid-December, German President Christian Wulff has been embroiled in a political scandal. The German president has no real political power and his function is largely ceremonial; nevertheless, Wulff was an appointee of Merkel's and his apparent inadequacy to fulfill his function is reflecting badly on her.
Last December, the German newspaper Bild revealed that in 2008 Wulff and his wife Bettina received an advantageous loan of €500,000 ($649,000) from the wife of Egon Geerkens, a wealthy businessman. This happened at a time when Wulff was still Governor of the state of Lower Saxony, where state law prohibits the Governor from accepting such loans. Although there had been rumors about Governor Wulff and his wife spending holidays at Geerkens' expense, Wulff had always denied business relations with Geerkens, even in February 2010 when members of the State Parliament of Lower Saxony questioned the Governor about them.
In June 2010, Merkel had the Bundestag install her protégé Wulff as President after the resignation the previous month of President Horst Köhler. Last December, when Wulff heard that the mass circulation Bild, Germany's largest newspaper, was about to publish the story of his loan from Geerkens' wife, he rang the paper's chief editor to express his outrage and threatened "war against the paper," including legal action. He also rang the president of the company that owns Bild, as well as its largest shareholder, urging them to put pressure on the paper to suppress the article, but was rebuffed. Bild did run the story, although it did not mention Wulff's attempt to intimidate the paper and its owners.
The article in Bild was damaging for the President, but Wulff easily managed to survive politically because the loan was relatively small and the financial benefit for Wulff even smaller (only about €20,000). The attention of the media was also distracted by the role of Wulff's beautiful, flamboyant and ambitious 38-year old wife, Bettina, whom Wulff had married after divorcing his first wife after 18 years of marriage. Bettina Körner Wulff is 14 years younger than her husband and is Germany's youngest German First Lady ever.
During his New Year's speech, however, Wulff made a major mistake. He expressed his unequivocal support for freedom of the press as one of the most important pillars of a democratic society. This prompted the Sueddeutsche Zeitung daily to refer to rumors of Wulff's attempt to intimidate Bild, whereupon Bild confirmed the story.
Despite widespread demands in the German press that Wulff step down, the President has so far refused to do so. He has offered his apologies and has said in a television interview that he made a mistake, but he denied having done anything illegal and stated that he would remain in office until the end of his five-year term in 2015.
German opposition parties are also calling for Wulff's resignation, but Chancellor Merkel is still standing by him. His resignation would be seriously damaging to her politically at a time when her coalition partner, the Liberal Party, is doing badly in the polls and the eurozone is facing the worst crisis in its existence. Moreover, if Wulff resigns, he will be the second President to do so in less than two years' time – an event which risks undermining the credibility of the presidential institution. As Merkel installed Wulff as President, this would reflect badly on her and her credibility.
What could ultimately be even more damaging for Merkel, however, is the intense contrast between her present support for President Wulff and her refusal to support his predecessor Horst Köhler in 2010.
In May 2010, President Köhler -– a Christian-Democrat like Merkel and Wulff -– resigned after being criticized for advocating a larger German role in military missions abroad. During a radio interview, referring to the problem of piracy off the coast of Somalia, Köhler had said that Germany should consider military interventions"to protect our interests, such as ensuring free trade routes or preventing regional instabilities which are certain to negatively to impact our ability to safeguard trade, jobs and income."
A German President, in his role as a symbolic figure representing the entire nation, is not supposed to make controversial political statements. Köhler resigned because he felt that during the controversy that followed his remarks, he was not backed by Merkel. Like the German fear of inflation, the German aversion to foreign military operations is also rooted in recent German history. Nevertheless, Köhler was doing nothing more than what Merkel claims she is doing these days in using German tax money to support the euro: Protecting Germany's economic interests and preventing financial instabilities which are said to impact negatively Germany's ability to safeguard trade, jobs and income.
The question should be asked what, in view of Germany's past, is worse: a German President who advocates that his country offer military assistance, even outside Germany's borders, to help safeguard the interests of the free West, or a President who attempts to muzzle the press? That Chancellor Merkel does not seem to know the answer to this question is not to her credit.