Germany's Merkel is the New Tony Blair

For the better part of a decade, he bestrode Europe like few other politicians—a truly transformative leader in the tradition of a Thatcher or de Gaulle. Tony Blair was often divisive. He was never the ardent European many hoped. Yet, as he prepares to stand down as prime minister, the question inevitably arises: who, in Europe, can fill his shoes?

Probably not his all-but-certain successor, Gordon Brown, at least not soon. The searing experience of Iraq has left Britain mired in cynicism about government, and Brown will have his hands full trying to repair the damage.

Nor can a new French president expect to play the heavyweight in Europe's affairs. For the foreseeable future France's fixation will be its own troubled economy—and an accompanying crisis of national identity. Italy's Romano Prodi and Spain's José Luis Rodríguez Zapatero are middleweight powers, sidelined by their own problems at home. Arise, then, German Chancellor Angela Merkel, champion of Europe.

She was "the girl" to Helmut Kohl, the father of unification and a titan of his age. Yet not even Kohl—for a variety of historical reasons, now passing—could play the role that Merkel, 52, is growing into: Germany's first truly Pan-European leader. Since becoming chancellor in 2005, she has grown quickly in stature. She is presiding over a sudden and extraordinary economic boom that some have dubbed Wirtschaftswunder 2.0—a second industrial miracle, not glimpsed since the golden era of the ' 60s. She's retooled the Franco-German compact that has traditionally run the European Union, establishing that Berlin increasingly calls the shots in the Union, not Paris, as she demonstrated in muscling through her famous EU budget compromise just a month after taking office. She's shaken up the cozy relationship between Germany and Russia that was a hallmark of her predecessor, Gerhard Schröder. Most significantly, she's repaired her country's relationship with the United States—so much so that Berlin is edging out London as Washington's first port of call on European matters, a shift confirmed even by several senior British government officials. Indeed these officials wouldn't quarrel with the judgment by Spiegel Online: "Merkel is the new Tony Blair."

Angela certainly got the Tony treatment during her early May visit in Washington for the annual U.S.-EU summit. President George W. Bush outdid himself in welcoming her. But Merkel's Blairite credentials are not just for show. She has borrowed consciously from Blair, according to advisers close to both. Like Blair, Merkel is convinced that going head-to-head against the United States—the way the French have done—is a dead end. Whether the issue is Middle East policy, trade or climate change, she believes that nothing can be accomplished without partnering with the United States.

Yet Merkel clearly differs from Blair. First, she has come to power toward the end of Bush's era. The U.S. president is no more popular in Germany than in Britain, but Merkel suffers less taint by association, not only because Germans know that he will soon be gone, but also because the Iraq War (which she backed before she came to power) is fading as an issue. Perhaps more important, the alliance Merkel seeks to forge with America is primarily economic. It's about what one of her advisers calls "a larger common market," in which Europe and the United States attempt to replicate the economic advantages that the EU has accrued by dismantling trade barriers and harmonizing regulatory regimes. Merkel does not share Blair's missionary foreign policy. Her interests lie less with an abstract "war on terror" than in commercial practicalities. Thus, while Blair leaves office a humbled, tragic figure, Merkel basks in 70 percent approval ratings.

Merkel's pro-American tilt reflects her life story: an East German physicist who became politically active after the fall of the Berlin wall in 1989. In a recent speech marking the 50th anniversary of the Treaties of Rome, which gave birth to the modern EU, she spoke of "the power of freedom." "Nothing ever has to stay the way it is," she declared, sounding almost, well, American. That also helps to explain her special connection to the new EU members from the old Soviet bloc—as well as her distinct coolness toward Russian President Vladimir Putin. Germany simply does "not have as many values in common with Russia as it does with America," she says. That's in stark contrast to Schröder, who praised Putin as "a democrat through and through." Merkel remembers her younger years in East Germany's nascent civil-rights movement when Putin, then a lieutenant colonel in the KGB, according to Spiegel, "was busy burning intelligence records at his office in Dresden."

Personal history aside, according to an aide, it is Merkel's preoccupation with globalization that "keeps her going" and fuels her desire to improve U.S.-European relations. "She believes the differences between Europe and America are dwarfed by the differences the two of us have with other parts of the world," says a senior adviser. To counter the growing economic power of Asia, Merkel has flirted with the idea of creating a transatlantic free-trade agreement, a TAFTA modeled on NAFTA, the North American Free Trade Agreement, signed by the United States, Mexico and Canada. This idea has never quite taken off, and in Washington she set her sights much lower. What she came away with was the so-called framework for advancing transatlantic economic integration, which aims to eliminate costly and inefficient regulations governing industries from automaking to chemicals.

Merkel has been lucky in her timing. Germany is already the world's largest exporter and third largest economy, after the United States and Japan. But lately it has been on a tear. GDP growth for 2007 is projected at 2.4 percent, which would put Germany almost in line with Britain. Business confidence is running at a six-year high. The economic woes that followed reunification in 1990 are fading, thanks to some energetic corporate restructuring and a few modest labor-market reforms. Unemployment is tumbling—down 200,000 in the last two months alone and now below the 4 million mark for the first time since 2002, according to figures from the Federal Labor Office. A crippling budget deficit seems to be on the verge of disappearing.

The rest of Europe is watching. Will Germany re-emerge as the traditional locomotive of Europe? Will other European nations follow its lead and undertake similar regulatory and corporate reforms? It seems likely, and Merkel will most probably push the pace. In March, she announced plans for a cut in corporate-tax rates from 38 to 29.8 percent, to take effect in January, undoubtedly spurring further growth. If a new French president emerges who shares Merkel's business-friendly, pro-growth outlook, the whole of Europe could find itself on the road to economic turnaround.

That Germany holds the presidencies of both the EU and the G8, just now, gives Merkel added heft. No leader in recent memory has enjoyed such universally good relations with the other men and women who run Europe. Merkel enjoys particularly warm relations with José Manuel Barroso, president of the European Commission, a pro-American advocate of economic reform. The Brits are fans, too. Blair is Merkel's closest non-German political ally, and Brown is all but certain to be a friend as well—not least because the two share similar economic philosophies. Merkel's aides make no attempt to hide the fact that her climate-change initiative, item No. 1 on her agenda for the G8 summit next month, is a follow-up to Blair's at Gleneagles, Scotland, in 2005.

Though clearly relishing her new- found stature on Europe's stage, Merkel is probably the last person to let it go to her head. One aide says she has been "terribly saddened" by the downfall in Blair's popular fortunes, and the manner of his leaving office. Her own upbringing is a lesson on the capriciousness of fate and political power. The small East German town where she grew up features a massive statue of Karl Marx; she was just 7 years old when the Berlin wall was built. Today she works in the almost unbearably sleek steel-and-glass chancellery not far from where it once stood. She knows how far people can rise, and how far they can fall. But above all, she knows the importance of seizing your moment when it comes around.

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