September 27, 2017 / 6:25 PM / in 22 days

After euro zone, Germany's Schaeuble faces new challenge in far-right

FILE PHOTO: German Finance Minister Wolfgang Schaeuble addresses the European Banking Congress at the Old Opera house in Frankfurt, Germany November 20, 2015. REUTERS/Ralph Orlowski/File Photo

BERLIN (Reuters) - In his eight years as German finance minister, Wolfgang Schaeuble earned a reputation in the euro zone as a feisty disciplinarian, insisting on painful austerity measures for debt-ridden countries like Greece.

Now poised to become president of Germany’s lower house of parliament, the Bundestag, Schaeuble, 75, will instead try to impose discipline on fractious lawmakers, including a far-right, eurosceptic party, following Sunday’s federal election.

As custodian of Germany’s public finances, Schaeuble has proven a trusted, if awkward, ally for Chancellor Angela Merkel, securing for her the support of sceptical lawmakers on the right of their conservative bloc for three Greek bailouts - a feat he achieved by ensuring the aid came with hairshirt austerity.

By agreeing to move to the Bundestag, Schaeuble has opened the way for the liberal Free Democrats (FDP) to take over his coveted ministry, helping to unblock talks on a new three-way coalition likely also to include the Greens.

To the alarm of Merkel’s conservatives, the far-right Alternative for Germany (AfD) is now the third largest party in the Bundestag - and the highly experienced, resilient Schaeuble is viewed as the best qualified to tame recalcitrant lawmakers.

Leading AfD candidate Alexander Gauland has vowed his party would “hunt” the new government, whatever its make-up.

Already Germany’s longest serving lawmaker, Schaeuble brings to his new job a fierce intellect, constitutional expertise and a sharp tongue he is not afraid to use, even against Merkel.

“Do you know what you are doing?” he recalled asking her when she sounded him out about becoming finance minister in 2009. “I‘m loyal ... but uncomfortable.”

INFLUENTIAL FIGURE

So it has proved. Once Merkel’s boss before their roles were reversed, Schaeuble dominated Germany’s policy response to the euro zone crisis and intervened when he felt the chancellor was on the wrong track - and not only in the field of finance.

In November 2015, soon after Merkel opened Germany’s borders to migrants pouring in from the Middle East, he said the country risked facing “an avalanche” of refugees triggered by “careless” actions.

He subsequently defended Merkel’s open-door migrant policy, however, accusing the AfD of fuelling fears.

“So far, there is no one in Germany who has received one euro less for his family or his children because refugees have come here,” he said last September.

Calling out the AfD in that way will now be a full-time job for Schaeuble, a man who has devoted his career to reunifying Germany and securing its place in a European project he has long championed and tried to strengthen, however controversially in the eyes of many Greeks and others.

His laser-like focus on budgetary rigour has seen Germany run a budget surplus for the last three years, though critics say his insistence on austerity policies deepened the euro zone crisis and hampered its economic recovery.

“NATURAL AUTHORITY”

Although he is relinquishing the powerful finance ministry, as Bundestag president Schaeuble will technically outrank Merkel. The position ranks second in the state hierarchy after the president of the republic and ahead of the chancellor.

He has outranked her before: As head of their Christian Democratic Union (CDU) in 1998 following then-chancellor Helmut Kohl’s election loss, Schaeuble named Merkel as his deputy. It was a pairing that would last less than a year and a half.

Caught up in a party funding scandal surrounding Kohl, he was forced to resign as party leader in 2000, with Merkel taking over.

But Schaeuble is a survivor. Wheelchair-bound since a deranged man shot him at an election campaign event a few days after German reunification in 1990, he lives for the job and signalled before the election his readiness to stay in politics.

This drive has won the respect of fellow conservatives and lawmakers from other parties, who want him to bring his unparalleled weight to the role of Bundestag president, normally a low-profile position.

“A brilliant speaker with natural authority, he also possesses the tactical wit to rein in AfD MPs if they were to stage calculated affronts against established political culture,” said Carsten Nickel of Teneo Intelligence.

Despite his conservative views on financial matters, Schaeuble has been a leading voice calling for better integration of Muslims into German society.

As German interior minister in 2006, Schaeuble founded the German Islam Conference.

At a 10th anniversary celebration last year, he said there was no question that “Islam belongs to Germany,” but he also underscored the importance of cracking down on criminals and terrorists among the migrants who entered the country.

Economic policymakers in southern Europe longing to see the back of him may come to regret his departure as the FDP - now likely to take the finance ministry - is even more hawkish than Schaeuble.

The pro-business FDP wants euro zone countries to be able to leave the currency bloc rather than stay under an “interminable rescue policy”, and it favours winding down the lending capacity of the euro zone’s ESM rescue fund.

“Schaeuble is one of the most pro-European politicians that I know, so from a common eurozone perspective it couldn’t go better with someone else, let alone an FDP minister,” said one euro zone official.

Additional reporting by Jan Strupczewski in Brussels; Editing by Gareth Jones

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