Merkel simply did not want the merger and not even France's President Francois Hollande and Britain's Prime Minister David Cameron could do anything about it. On Oct. 9, a day before a regulatory deadline expired, Merkel called Hollande and told him that she did not want things to proceed. And when Cameron then tried to reach her for a last-ditch attempt to rescue the deal, she would not even pick up the phone, insiders say.
Merkel, Aviation Week's 2012 Person of the Year, has had huge influence on the aerospace industry. That influence did not simply sink an EADS/BAE Systems merger, it changed the very arc Europe's largest aerospace and defense company was on and altered the transatlantic industrial landscape.
Shortly before the turn of the year 2013, the German government became a direct and major shareholder in EADS. Germany's political establishment has long quipped about the tight grip the French government has on what it considers industries of strategic importance. Germany has not been as intimately involved in the running of its industries. Ironically, it is a coalition of conservatives and liberals—usually those that argue the loudest against state interference in private enterprise—that has changed the previous course and started reining in aerospace in a previously unheard of way.
The reasons why all of this is going on have little or nothing to do with aerospace but show how easily the industry's course can be changed by forces outside the markets or its products. For EADS and BAE, the reasons had to do with the sad realities of a Europe in turmoil, disagreement and mistrust. And they had to do with Angela Merkel's own background.
Merkel, 58, was born in Hamburg, but moved to East Germany with her family in 1954. Following graduation from high school, she studied physics in Leipzig and started a university career that ultimately landed her a job at the academy of sciences in East Berlin. Although she would quickly become involved in the first freely elected government of East Germany in 1990, she was not politically active during the Communist era. Her father was a Protestant minister and Merkel never became a member of SED, the ruling socialist party nor of the former so-called “bloc parties” that served as charade of pluralism but actually were all part of the establishment.
After the collapse of SED and the first democratic elections in East Germany, Merkel's began her political career as spokesperson for Demokratischer Aufbruch (DA, Democratic Awakening), one of the new parties that quickly merged with CDU, the conservative party. In 1991 and in the reunified Germany, she became minister for youth and women in Helmut Kohl's third cabinet and, in 1994, minister for the environment. Following Kohl's defeat in 1998, she continued to rise through the CDU ranks and took over its chairmanship in 2000. In 2005, she became chancellor, leading a grand coalition with the Social Democrats before joining forces with the Liberals in 2009. Merkel is up for reelection in September.
Merkel is often described as being extremely pragmatic, non-ideological and unemotional. But what is perhaps the most striking feature of her policies is a distinct coolness about grand visions of European integration. Helmut Kohl, her predecessor at the party's top and as CDU Chancellor, chose European integration as his overarching foreign policy goal. Merkel, it seems, could not care less about Europe or visions. Of course, Europe is important to her when it comes to protecting German interests, but Merkel certainly does not serve well as a visionary. “If you have visions, go see a doctor,” said former Social Democratic Chancellor Helmut Schmidt. That statement could well have been one of Merkel's.
If she does have a vision, then it is about fiscal discipline. Merkel has been the driving force behind efforts to bring public spending more in line with budgets. She was willing to accept the social ruptures as a consequence and was long unsure about whether Greece should exit the eurozone. The suspicion among her fellow heads of state may be mutual. Time magazine put it succinctly on the cover of its international edition recently with the words, “Why everybody loves to hate Angela Merkel.”
Merkel's skepticism of a grand, unified European community and her wariness of European partners played a key role in the decision not to allow the EADS/BAE merger and push through her own corporate governance reform at EADS.
“What really shocked us, even looking back, is the approach of the German government that followed one simple rule: If France, the U.K. and EADS management like it, then there has to be something wrong with it,” says one executive who participated in the negotiations. “But what does that tell us about European unity?” Merkel studied Russian in school and she admires the U.S. (She was one of the very few European politicians with a close relationship to then-U.S. President George W. Bush.) But France? That's a different story. Because Merkel mistrusts France, she could not allow the merger, and she believes Germany needs to own as many shares in EADS as France.