BERLIN // After two years as undisputed queen of Europe in the debt crisis, Angela Merkel's crown is slipping.
The German chancellor, vilified across the continent for saddling high-debt nations with austerity measures that have plunged them into deeper recession, succumbed to a rebellion by the leaders of Italy, Spain and France at last week's EU summit. They forced her to accept a softening of bailout terms she had vehemently rejected only hours earlier.
Mrs Merkel had built a reputation as skilful mediator on the international stage since coming to power in 2005, but she has lost it in the course of the crisis. Driven by domestic public opinion, she has adopted an uncompromising stance, forcing Europe into a fiscal straitjacket in order to limit the cost to German taxpayers of rescuing the euro.
Britain's left-wing New Statesman magazine described her as "Europe's Most Dangerous Leader" last month with a front page photo montage portraying her as a Terminator robot with a glinting red eye.
The magazine argued that Mrs Merkel's "mania for austerity" was destroying Europe and that she was a bigger threat to global prosperity and order than Iranian president Mahmoud Ahmadinejad or North Korea's Kim Jong-un.
The chancellor is thick-skinned enough to shrug off such hyperbole, just as she has ignored being featured in a Nazi uniform in the Greek media, as a whip-wielding dominatrix in Spain and being called a "lard-arse" in one Italian newspaper last week.
But the EU summit is widely seen as a stinging defeat for her. It showed Europe's balance of power is shifting from Berlin towards an alliance of southern nations.
The leaders of Italy and Spain, Mario Monti and Mariano Rajoy, with support from French President Francois Hollande, pushed Mrs Merkel into letting the EU's permanent rescue fund, the European Stability Mechanism (ESM), intervene on bond markets to shore up troubled states and to inject aid directly into stricken banks from next year.
They blackmailed her by threatening to block an EU growth pact that she urgently needed to secure broad support in a German parliamentary vote on her European policy on Friday. So she gave in, and in doing so crossed one of her red lines by allowing nations to get easier access to aid without forcing them to deliver anything in return.
"For the first time in more than two years of crisis, the euro states refused to obey a German command at a decisive moment," wrote Bild, the country's biggest-selling newspaper. "There is no doubt about it - the chancellor allowed herself to be taken off-guard at the euro summit."
Der Spiegel, a German news magazine, described Mrs Merkel as a "hostage of the south" and commented: "Europe's power architecture has shifted - to Germany's disadvantage."
Mrs Merkel, no stranger to U-turns at home, has stuck to her guns in Europe because most Germans are fed up with bailing out nations they see as profligate.
The German economy is still doing well, unlike most of its neighbours, but there are fears that the bailouts will end up overstretching even Germany's resources. Its exposure in loans and guarantees amounts to €310 billion (Dh1.423 trillion).
At the previous 19 summits held since the crisis erupted, Mrs Merkel got her way because she had an ally in French President Nicolas Sarkozy, who was voted out of office in May. His successor, Mr Hollande, has cancelled the close Franco-German alliance that had steered EU policy for decades. Mrs Merkel has looked increasingly isolated in recent months.
She faces trouble at home because her concessions have caused uproar among her conservatives. A key member of her coalition, Bavarian governor Horst Seehofer, threatened to bring down her government if she softens her position any further.
A further danger comes from Germany's Federal Constitutional Court, which has been inundated with petitions to block the ESM and the "fiscal pact" on European budget discipline that the German parliament approved last Friday. The measures, opponents argue, breach the constitution because they will transfer powers to Brussels.
The scale of Mrs Merkel's defeat in Brussels shouldn't be exaggerated, however. The rebellion hasn't dethroned her. She is still, after all, the leader of Europe's biggest economy -- and she is an astute negotiator.
She quietly pushed through a major German demand in Brussels - the establishment of a European banking watchdog run by the European Central Bank.
And the much-vaunted €120bn European "growth pact," initiated by Mr Hollande and celebrated in France as a big win over Mrs Merkel, contains virtually no new money - it will all come from existing EU structural funds.
In the end, she was beaten not by the Italians, French or Spanish but by the crisis itself. Without a deal to give Spain and Italy easier access to aid, their borrowing costs would have spiralled the next day. Her tough talk before the summit was aimed at placating her party. Once in Brussels, she had little choice but to budge.
With the debt debacle set to grind on, Mrs Merkel is likely to be forced into more concessions - a difficult prospect for her ahead of an election in 2013.
foreign.desk@thenational.ae
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Destroyer
Director: Karyn Kusama
Cast: Nicole Kidman, Toby Kebbell, Sebastian Stan
Rating: 3/5
UAE release: January 31
North Pole stats
Distance covered: 160km
Temperature: -40°C
Weight of equipment: 45kg
Altitude (metres above sea level): 0
Terrain: Ice rock
South Pole stats
Distance covered: 130km
Temperature: -50°C
Weight of equipment: 50kg
Altitude (metres above sea level): 3,300
Terrain: Flat ice
if you go
The flights
Emirates flies to Delhi with fares starting from around Dh760 return, while Etihad fares cost about Dh783 return. From Delhi, there are connecting flights to Lucknow.
Where to stay
It is advisable to stay in Lucknow and make a day trip to Kannauj. A stay at the Lebua Lucknow hotel, a traditional Lucknowi mansion, is recommended. Prices start from Dh300 per night (excluding taxes).
NO OTHER LAND
Director: Basel Adra, Yuval Abraham, Rachel Szor, Hamdan Ballal
Stars: Basel Adra, Yuval Abraham
Rating: 3.5/5
Formula Middle East Calendar (Formula Regional and Formula 4)
Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi
Round 3: February 7-9, Dubai Autodrome – Dubai
Round 4: February 14-16, Yas Marina Circuit – Abu Dhabi
Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia
COMPANY PROFILE
Name: Kumulus Water
Started: 2021
Founders: Iheb Triki and Mohamed Ali Abid
Based: Tunisia
Sector: Water technology
Number of staff: 22
Investment raised: $4 million
How to protect yourself when air quality drops
Install an air filter in your home.
Close your windows and turn on the AC.
Shower or bath after being outside.
Wear a face mask.
Stay indoors when conditions are particularly poor.
If driving, turn your engine off when stationary.
The White Lotus: Season three
Creator: Mike White
Starring: Walton Goggins, Jason Isaacs, Natasha Rothwell
Rating: 4.5/5
Jordan cabinet changes
In
- Raed Mozafar Abu Al Saoud, Minister of Water and Irrigation
- Dr Bassam Samir Al Talhouni, Minister of Justice
- Majd Mohamed Shoueikeh, State Minister of Development of Foundation Performance
- Azmi Mahmud Mohafaza, Minister of Education and Minister of Higher Education and Scientific Research
- Falah Abdalla Al Ammoush, Minister of Public Works and Housing
- Basma Moussa Ishakat, Minister of Social Development
- Dr Ghazi Monawar Al Zein, Minister of Health
- Ibrahim Sobhi Alshahahede, Minister of Agriculture and Minister of Environment
- Dr Mohamed Suleiman Aburamman, Minister of Culture and Minister of Youth
Out
- Dr Adel Issa Al Tawissi, Minister of High Education and Scientific Research
- Hala Noaman “Basiso Lattouf”, Minister of Social Development
- Dr Mahmud Yassin Al Sheyab, Minister of Health
- Yahya Moussa Kasbi, Minister of Public Works and Housing
- Nayef Hamidi Al Fayez, Minister of Environment
- Majd Mohamed Shoueika, Minister of Public Sector Development
- Khalid Moussa Al Huneifat, Minister of Agriculture
- Dr Awad Abu Jarad Al Mushakiba, Minister of Justice
- Mounir Moussa Ouwais, Minister of Water and Agriculture
- Dr Azmi Mahmud Mohafaza, Minister of Education
- Mokarram Mustafa Al Kaysi, Minister of Youth
- Basma Mohamed Al Nousour, Minister of Culture
Dubai Bling season three
Cast: Loujain Adada, Zeina Khoury, Farhana Bodi, Ebraheem Al Samadi, Mona Kattan, and couples Safa & Fahad Siddiqui and DJ Bliss & Danya Mohammed
Rating: 1/5
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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