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Cyprus backlash touches raw nerve in bailout-weary Berlin

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(Globalpost/GlobalPost)

By Noah Barkin

BERLIN (Reuters) - A wave of anti-German sentiment unleashed by the harsh conditions imposed in a 10-billion euro (8.4 billion pounds) bailout for Cyprus has stung politicians in Berlin and may harden resistance to further euro zone rescue measures in the run-up to a September election.

Although Germany was not alone in pressing for a "bail-in" of depositors in Cypriot banks that will force massive losses on wealthy savers and probably end the island's run as an offshore financial centre, it has taken much of the blame.

The foreign minister of Luxembourg, another small euro zone state with a big financial services industry, has accused Berlin of "striving for hegemony" in Europe, while his counterpart in Cyprus has denounced Germany for seeking to "impose its will" on southern European partners which desperately need its help.

Alongside the official criticism, Chancellor Angela Merkel has endure ugly, populist attacks that liken Germany's new readiness to wield its economic influence to its genocidal years of military domination of the continent under Adolf Hitler.

Such jibes are not entirely new. Greek protesters took to parading around effigies of Merkel dressed in a Nazi uniform at the height of the crisis over Athens's debts last year.

But with an election looming in six months time, a new anti-euro party threatening to shake up the vote, and Germans increasingly weary of rescuing partners they see as undeserving and ungrateful, the latest backlash risks reducing the appetite for new aid measures in the government and the population.

"It's simply not acceptable that the ones that help the most end up being vilified," said Hans Michelbach, a finance expert in the Christian Social Union (CSU), Merkel's Bavarian regional ally, predicting a tougher line from Berlin going forward.

Even after the election is out of the way, J.P. Morgan analyst Alex White said it would be wrong to expect a softening of Germany's stance. The Cyprus case suggests that Germany will be increasingly willing to push for what it wants in Europe regardless of what others think, he said.

MORE SOLIDARITY

In a sign of the mounting resentment in Berlin, politicians from across the political spectrum could be heard on Wednesday bemoaning the lack of visible support from Germany's EU allies in praising the Cyprus deal since it was agreed in the early morning hours of Monday following marathon talks in Brussels.

"In the face of unfair accusations, I would have hoped for more solidarity and support for Germany, especially from the top - in other words from the presidents of the European Commission and European Council," said the justice minister in Merkel's centre-right coalition, Sabine Leutheusser-Schnarrenberger.

Gunther Krichbaum, a Merkel ally who heads the European Affairs committee in the German parliament, said Berlin could not sell the deal on its own: "It's like the Tour de France - for a team to win you have to take it in turns to lead from the front," he told reporters during a visit to Paris.

In addition to Germany, the International Monetary Fund (IMF) and key partners including Finland, the Netherlands, Austria and France all backed the Cyprus deal during the talks in Brussels. France's Socialist finance minister Pierre Moscovici even went so far as to call Cyprus a "casino economy".

But since then, the silence from Paris has been deafening. And with the exception of feisty Austrian finance minister Maria Fekter, few of Germany's allies have spoken out publicly in favour of a deal which all their governments are paying for.

European Commission President Jose Manuel Barroso did defend it on Monday, but also raised doubts in a news conference about whether it would work. He and European Council President Herman van Rompuy both declined to respond to Leutheusser-Schnarrenberger's accusations of ducking their responsibilities.

"FOURTH REICH"

The result is that Germany has felt unfairly isolated on an agreement that was signed by all 17 euro zone governments. Nazi jibes and ingratitude have only deepened the sense of alienation in a nation that long saw it as a duty to support - and pay for - EU development as a response to crimes committed in its name.

As the deal was being done, Spanish newspaper El Pais published - and withdrew - an opinion piece entitled "Germany versus Europe" that said Merkel like Hitler had declared war.

On Wednesday, a blog in Britain's Daily Telegraph newspaper warned that Germany was becoming "too powerful for its own good and ours" while an anonymous hedge fund blogger published a satirical version of a euro zone finance ministers' statement on Cyprus to mock the Eurogroup as a cover for the "Fourth Reich".

Marcello De Cecco, an economist linked to Italy's centre-left, wrote in La Repubblica this week that Germans were marching the continent towards "disunity and the abyss".

But if some see a risk of Germans retreating under the hail of criticism from their willingness to bail out EU partners, Josef Joffe, publisher-editor of the liberal Die Zeit newspaper in Hamburg, said it was time Germany got over its sensitivity and accustomed to the bashing that comes with success:

"The more power a country has, the more criticism it has to accept. This is the case for the United States on the global stage, and Germany in Europe," he wrote.

"It's the price of greater stature. He who has the power also gets the responsibility and, when things go wrong, also the blame, whether as a lightning rod or scapegoat."

(Additional reporting by Andreas Rinke and Gernot Heller in Berlin, Mark John and Jean-Baptiste Vey in Paris, Renee Maltezou in Athens, Robin Emmott in Brussels and Eric Burroughs in London; Writing by Noah Barkin; Editing by Alastair Macdonald)

http://www.globalpost.com/dispatch/news/thomson-reuters/130327/cyprus-backlash-touches-raw-nerve-bailout-weary-berlin