SCENESETTER FOR VISIT OF NEA PDAS JAMES F. JEFFREY

C O N F I D E N T I A L BERLIN 003433

SIPDIS

SIPDIS

STATE FOR NEA/FO, NEA/IR, EUR/AGS

E.O. 12958: DECL: 12/05/2016
TAGS: PGOV PREL GM
SUBJECT: SCENESETTER FOR VISIT OF NEA PDAS JAMES F. JEFFREY


Classified By: POLITICAL MINISTER COUNSELOR JOHN BAUMAN FOR REASONS 1.4
(b)/(d)


1. (C) After a brief honeymoon during her first year in
office, Chancellor Angela Merkel and her Grand Coalition
government face low opinion ratings at home. This owes
largely to difficulties with domestic economic, social, and
political restructuring; the debate about the role of German
troops overseas plays a role as well. The approaching
presidencies of the EU and G-8 will put Merkel and her
government in the spotlight.


2. (C) After focusing on foreign policy in its initial
months, the government turned its attention to its extensive
domestic agenda, which included a value-added tax increase,
corporate tax relief, passage of an EU-mandated
anti-discrimination law, and reforms to Germany's health
insurance system. They reached broad agreement on a 3
percent value added tax increase, which will enter into
effect in 2007. Progress on economic reform has been slow
due to differences not only between the coalition parties,
but also among Chancellor Merkel and the CDU
Ministers-President in several states. Successful reforms
are key to Germany again becoming an engine for European and
global economic growth, to enable Germany to play a more
active role as a global partner for the U.S., and to help
free market forces win in the EU. Several months of
declining unemployment and rising growth may help to redress
some of the public opinion losses Merkel and her government
have suffered since the summer.


3. (C) Despite the good economic news, there is a general
sense Merkel and her Coalition need to tackle pension, labor
market, tax, regulatory and other economic problems dating
back to the Kohl era. At the same time, there is little
consensus in how to move ahead. Business leaders tell her and
other senior Coalition figures they are unhappy with the lack
of progress to date; the press snipes at every idea and
highlights every politician's utterance that suggests
differences among the Coalition partners. Business leaders
often note their companies may be doing well worldwide, but
that does not mean they are doing well in Germany. Flagship
German companies may be looking more at operations in China
or India or the U.S. than at sales in Germany.


4. (C) FOREIGN POLICY: The grand coalition continues to
manage foreign policy with little friction. The CDU and SPD
have few, if any, differences over key issues such as Iran,
Russia and the Middle East. There are differences, such as
over Turkish accession to the EU; although policy is clearly
spelled out in the coalition agreement, Merkel is
increasingly vocal about her opposition to Turkish EU
membership.


5. (C) EU PRESIDENCY: When the Germans hold the EU
presidency next year they will highlight a new "neighborhood
policy" for countries like Ukraine and Georgia that would
strengthen ties with the EU. The Germans have also made
strengthening ties between the EU and Central Asia a priority
for their presidency and hope to prepare the ground, during
their presidency, for a new Partnership and Cooperation
Agreement to be signed between the EU and Russia.

6. (C) SECURITY POLICY: Chancellor Merkel has emphasized
the "primacy of NATO" in Germany's defense and security
policy. Her government recently approved a White Paper on
defense that represents a new level of Germany ambition to
meet its security responsibilities. The White Paper stresses
the concept of "networked security" -- coordination of
civilian and military efforts to achieve security goals.
Germany continues to be one of the largest contributors to
NATO operations, including ISAF, and is committed to the
success of ISAF's engagement in Afghanistan. However, the
Germans have continued to resist strongly, most recently at
the Riga Summit, calls by Allies to eliminate caveats that
inhibit them from deploying troops to southern Afghanistan.


7. (C) IRAN: Germany stands against Iran acquiring nuclear
weapons. Its historically close ties with Iran continue to
complicate their current relationship, as concerns about
Tehran's nuclear program and human rights conflict with
Germany's strong economic interests there. The Germans say
they do not consider broad-based sanctions to be an effective
instrument. One major factor in its reluctance to sign onto
tougher sanctions is Germany's continued economic interests
and trade relationship with Iran. From January to November
2005 Germany exported over four billion euro in goods to
Iran. Despite the current political climate, German industry
is still making large deals with the Iranian government:
Siemens is reported to have recently signed a $450 million
deal with the GOI to produce train cars for the expansion of
the Iranian rail system.

8. (C) While Iran is not a top priority for the German EU
Presidency, MFA officials have noted that they will pursue
human rights issues in their country-specific Presidency
planning and programming, focusing on strengthening Iranian
civil society. Meanwhile, German media have started picking
up the issue of the December 11-12 Tehran Holocaust
conference, which is expected to prominently feature
Holocaust deniers. The MFA's office for Holocaust issues and
anti-Semitism has told Post that they plan to make a
"factual, nonemotional" statement, noting concern (but not
outrage) about the event, Germany's semi-public Federal
Office for Civic Education, together with a number of NGOs,
is co-sponsoring a bona fide Holocaust conference in Berlin
to coincide with the Tehran conference.


9. (C) LEBANON/SYRIA: The Germans have been very active in
the diplomacy surrounding the UNIFIL deployment to Lebanon.
Chancellor Merkel sees the UNIFIL mission largely through the
prism of Germany's historic responsibility to protect Israel.
The German naval contingent of UNIFIL has about 1,000
troops, and is the first significant German troop deployment
to the Middle East. Germany has deployed no ground troops,
largely over concerns that German soldiers might get involved
in an exchange of fire with Israeli troops, which is viewed
as unthinkable because of Germany's history. Germany has
also provided Lebanon with scanning equipment to detect
weapons crossing the border with Syria or entering ports. A
small group of German customs officers is helping to train
Lebanese customs officers. The Germans have strongly
resisted an active role by their officers in actually
monitoring the border.


10. (C) The Germans believe that the Lebanon issue--in
particular preventing weapons from entering Lebanon from
Syria-- can ultimately only be solved by inducing Syria to be
more cooperative through engagement. There are differences
of opinion between the Chancellery and Foreign Ministry about
the timing of such engagement. Foreign Minister Steinmeier
has cautiously pursued contacts with Syria, most recently in
talks with Syrian President Bashar al-Assad and FM Waleed
al-Mu'allim December 4. During his visit to Damascus,
Steinmeier called on Syria to respect Lebanese sovereignty,
to exert a "moderating" influence on Hizbollah in order to
end the anti-government demonstrations in Beirut, and to
support the Hariri tribunal.

11. (C) IRAQ: Our efforts to push for increased German
support for Iraqi reconstruction continue to meet with a
mixed response. We have continued to use the list you
provided to senior German officials during your December 2005
visit to push Germany for action, but progress stalled after
early and welcome Merkel government moves to address Iraq
debt and join IRFFI. German officials frequently cite the
Baghdad security climate as an obstacle to sending visitors,
stationing officials, or providing training anywhere in Iraq.
Steinmeier has invited Iraq,s foreign minister to Berlin in
a sign of political support and expressed his own interest in
visiting Baghdad at some point in the future. Germany is
considering expanding some training programs, e.g., for civil
servants, and restarting its police training program for
Iraqis in the UAE. We remain convinced Germany, given its
experience in democratic/economic development elsewhere in
the world, its resources, and its decades-long involvement in
Iraq can do more. We have informally proposed to them that
if the international community decides on the need for a
senior level Iraq Compact meeting in the near future, Germany
should offer to host it, especially given its 2007 G-8
Presidency and its EU Presidency during the first half of

2007.


12. (U) MEPP: Germany, in particular Chancellor Merkel,
remains strong supporters of Israel, while also continuing to
publicly voice support for the Quartet. In his December 2
meeting with Palestinian President Mahmoud Abbas, Steinmeier
promised to work for reactivating of the Quartet during
Germany's EU presidency.


KOENIG