Whoever ends up sharing power with Angela Merkel, eurozone countries will wait in vain for a break with austerity politics

Ian Traynor, Europe editor The Guardian, Tuesday 10 September 2013

If there is one thing that is clear from a lacklustre German election campaign, it is that the voters are not hungry for change. That's excellent news for the incumbent chancellor, Angela Merkel, who looks like a shoo-in for a third term on 22 September. The big question is, who becomes her junior coalition partner: the current liberals, or Free Democrats (FDP), if they surmount the 5%-of-the-vote hurdle, or a grand coalition with the second-biggest party, the Social Democrats (SPD)?

If the Germans are voting for no big change in Germany, they will also be voting for no dramatic shift in Merkel's European policy. Unlikely to disappoint her voters, she is certain to disappoint her fellow EU leaders.

" However the Germans vote on 22 September, Berlin's attitude to the EU is not going to change much, " Charles Grant, director of the Centre for European Reform, wrote this week. Most analysts agree.

Ulrike Guerot, of the European Council on Foreign Relations, in Berlin, said: " The Germany that many in Europe hope for is not on offer. It is hard to imagine any new government coalition – or the old one, if it is returned to power – providing enlightened leadership of a kind that accepts significant short-term sacrifice to buy into a far more uncertain vision of long-term political stability. Germany lives in a different world."

EU business has been effectively on hold for months as the union awaits the outcome of what is by far the biggest political event in Europe this year. But the other capitals have quite a while to wait still, for the ballot will be followed by weeks of horse trading and programme-writing as Merkel weighs up her coalition options.

The pressures on Merkel are high. David Cameron is keen to forge a reformist alliance that would allow him to " repatriate" powers to Britain from Brussels and then sell that as a winning product in a 2017 referendum, bragging of a " new deal" that keeps the UK in the EU.

Those hopes are almost certain to be dashed. Any new deal would entail renegotiating the EU treaties. There is no appetite for that in Brussels or Paris, and a diminishing one in Berlin. The odds are that Cameron will be disappointed. He won't be the only one.

The big innovation being cooked up in eurozone capitals in response to the euro crisis is the new system of banking supervision and regulation known as the banking union. The idea is to make the European Central Bank in Frankfurt the supervisory authority for the eurozone banking sector, initially the big banks. That bit is effectively accomplished and comes into force towards the end of next year.

Its corollary is the tricky part: a resolution authority and fund to deal with weak or bad banks. That body would decide whether a bank gets wound up or helped out. For the European commission, the French, the Italians and the Spanish, that means common fiscal backstops in the eurozone and pooled eurozone funds for dealing with a banking collapse.

The Germans are resisting, unwilling to have to pay for other countries' bank failures or repairs and also reluctant to force German banks to contribute to a resolution fund that could shore up, for example, a Spanish bank over which the Germans have no control.

Enrico Letta, the Italian prime minister, pleaded in Brussels on Monday for greater German flexibility. " Some degree of risk-sharing" was needed in the eurozone, he argued. Referring to German reluctance to go there, he added: " Some see this as unfair, as [the EU was] a transfer union."

The SPD and the FDP in Germany also oppose this. There is little chance of a shift in the German position very quickly. Besides, the Germans argue that a full-blown banking union entails surrender of national sovereignty and would be subject to national constraints, most importantly challenges in the country's powerful constitutional court. It would also require a rewriting of the European treaties, they say.

Consistently, through more than three years of eurozone crisis, Merkel has been pressed to do more, but her bottom line has always been to refuse German liability for the faults and problems of others unless German rules and controls are observed.

While others look to Berlin for leadership, the German lesson is: " Do as we do." Germany sees itself as an economic role model for the countries that have been battered by the crisis.

" Germany and the rest of Europe are operating on different frequencies, " noted Guerot.

The central relationship in the EU, though not as central as it used to be, is still the one between Berlin and Paris. Franç ois Hollande, elected last year as the anti-Merkel and the anti-austerity candidate, has failed to get the better of Berlin.

France is impatient for the German election to be over. On certain issues the two sides may be nearing common ground: they have both turned against Brussels and the European commission, and increasingly see the eurozone, as opposed to the wider EU, as the fulcrum of European integration. It is here that things may change after the election, but more likely by stealth and small steps than through a major institutional overhaul or big policy initiative.

For almost four years Merkel, the biggest player in the euro crisis, has been strongly criticised for hesitancy and dithering. But with EU leaders increasingly confident they have weathered the worst of the crisis, Merkel can claim vindication, and will find little reason to change her approach.