Margareta Pagano: With Merkel on side, PM's gamble may yet pay off

Germany's – possibly surprising – support for David Cameron's audacious EU speech, makes reform from the inside more likely

Behind every successful man, they say, stands a great woman. Well, David Cameron has got two of them. First is Clare Foges, the smart young poet who is known inside No 10 as the "Prime Minister's larynx". It was Foges who crafted his European speech and urged him to be brave enough to "speak with the safety-catch off".

Loading the trigger seems to have worked as within hours of making his audacious European in-out speech, Cameron had won over Angela Merkel, Germany's Chancellor, and if you believe Forbes, the second most powerful person in the world. Quite a catch.

Even though Merkel's response was carefully worded, her backing for Cameron's position is of huge significance and should not be underestimated. By suggesting that reforms to the EU are possible in a "fair compromise", Merkel has de facto put Cameron's demands on the menu and made them palatable. It's not the first time she has gone out on a limb to protect him as they share a similar view on many of the hottest EU issues from open global trade to budget restraint to name just two.

Even more fascinating was the response of the German press; those on the right, like, Die Welt gave the PM warm applause but so did those on the left like the daily Suddeutsche Zeitung. Here's an excerpt from its editorial: "David Cameron has spoken, but Europe isn't trembling …. The statement currently heard in Brussels that Britain needs Europe more than Europe needs Britain is foolish and dangerouz … because without the United Kingdom, Europe would have less esteem in the world, not more."

The German newspaper also made the point that is in the interest of the Germans and the French, especially, to not just pull the British along, but to instead bring them to the centre of the debate over Europe, adding: "Because the reality in Europe is such that the opinions over what is the right path to take are divergent across the EU. Cameron expects a lot from the EU, but he also acknowledged being a European. It would be wrong to give him the cold shoulder."

Cameron also got the thumbs-up from the Sweden's Prime Minister Fredrik Reinfeldt, who welcomed the reform debate as did Czech and Finnish ministers – all of whom are important UK allies within the EU and whose support will be critical.Who would have predicted such fan mail even a few months ago?

The timing of Merkel's support is interesting, too. It's not just our Saxon DNA that we share as new Bundesbank trade figures out last week show so vividly. Britain has now overtaken France to become Germany's biggest trade partner for the first time in the post-euro era. Anglo-German trade in goods and services soared by 20 per cent to €153bn (£130bn) in the first nine months of 2012, eclipsing Anglo-French trade. Most of the UK exports were medical equipment and drugs, cars (yes, it's true, albeit German ones such as parts for BMW and VW – which owns Bentley in Crewe) and oil products.

Our trade deficit has narrowed to €17bn. The UK is now the biggest inward investor with German companies such as Siemens leading the way. But the bigger picture for Germany is more interesting – it's trade with the eurozone has fallen from 46pc to 37pc since the euro was introduced. Trade with France is still a big chunk at €150bn but business is growing faster than ever with Bric countries.

So when Nick Clegg and some of the more pro-European UK business leaders – who resist reform – bleat about the loss of jobs and investment if we negotiate, they are missing the point. It's often missed, too, that most of the big improvements to freerer trade in Europe have happened without the EU; and have come from the private sector – cross-border banking thanks to Visa and now electronic-commerce with the web. Even the Channel Tunnel was built with private money.

By contrast, the things that most of us find really annoying – different plugs and not being able to use the same driving licence – are stuck in the more Francophone sclerotic EU.

If Cameron stands any chance of renegotiating or repatriating powers, he has to keep his new Iron Lady warm. François Hollande will never be on side: the French president is old-school Europe and will have choked on Merkel's support for the UK. There's no love lost between Hollande and Merkel: relations are said to be at freezing point.

Berlin fears Paris may become a liability for the eurozone and that Hollande is cosying up to Spain and Italy in an alliance against Germany. For his part, Hollande can't forgive Merkel for campaigning for Nicolas Sarkozy, and is said to be secretly planning to support her rival, the centre left Social Democratic Party, in November's elections.

On the face of it, Cameron and Merkel are an odd couple: he, the ambitious, Eton-Oxford educated son of a stockbroker and she, the equally ambitious, daughter of a Hamburg pastor, who grew up in East Germany and was a member of the socialist Free German Youth movement. But if their partnership shakes up the dirigiste architecture of the EU, then it could be a match that serves them well. Merkel's implicit support is not just friendliness. As the supreme politician, she knows she has to calm voters angered by the wealth transfers to southern Europe.

Ironically, by taking off the safety catch, the PM has made it more likely we stay in the EU and shake-it up; and that has to be good for all.

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