Is Angela Merkel changing course?

CC World Economic Forum on Flickr

Angela Merkel has just given an interview on her European policies to a series of European newspapers including The Guardian and Sueddeutsche Zeitung. What kind of headlines can be produced out of the same interview is very interesting. The Guardian title reads: “Angela Merkel casts doubt on saving Greece from financial meltdown” whereas the Sueddeutsche Zeitung writes: “Merkel wants to boost the European economy”.

The Guardian reports that:

Angela Merkel has cast doubt for the first time on Europe‘s chances of saving Greece from financial meltdown and sovereign default, conceding that Europe’s first ever multibillion bailout coupled with savage austerity was not working after two years of crisis that has brought the single currency to the brink of unravelling.

The Sueddeutsche writes that Merkel announced a shift of attention: “jobs and growth ought to be the focus now”. To finance a boost to growth and jobs, her eyes are on unspent EU structural and cohesion funds. In the current budget cycle ending in 2013, 72.9% of the €350bn total of structural and cohesion funds have yet to be spent. Merkel intends to use this cash to help SME’s, start-up businesses and research.

She also announced far-reaching plans for institutional reforms, including the ones opposed by Britain:

(…) the German chancellor also insisted – against widespread resistance elsewhere in the eurozone and in the UK – that the European court of justice (ECJ) be empowered to police the public spending and budget policies of the 17 countries in the euro.
She also called for the eventual creation of a European political union, with many more national powers ceded to a central government, a strengthened bicameral European parliament, and the ECJ assuming the role of Europe’s supreme court.

Could the concession that the current strategy is not working and that a much bigger focus on growth and jobs as well as major institutional reforms are necessary be the beginning of a much needed policy U-turn? Will she use her speech at the World Economic Forum in Davos later today to build on this interview? It is far too early to tell but maybe, just maybe, there is a chance that Europe switches to the appropriate policies.