Germany’s 37-year-old economy minister, Karl-Theodor zu Guttenberg, could become a liability for Chancellor Angela Merkel in September’s election thanks to his open criticism of the government’s 11th-hour rescue of carmaker Opel.

Guttenberg, a rising star in Merkel’s conservative camp, had argued for an Opel insolvency in the days preceding the deal.

He astonished reporters when he expressed objections to the agreement just minutes after the announcement in the early hours of Saturday that German taxpayers would help tide over Opel’s operations until General Motors concluded an agreement to sell Opel to a group led by Canadian supplier Magna.

“I want to say that, in a very difficult discussion process … I personally came to a different view of the risks,” said Guttenberg, a Bavarian who has been economy minister for less than four months. There are no Opel plants in Bavaria.

There are strong rumours he threatened to resign after his opposition to the deal was ignored and at the weekend Guttenberg, seen by some as a possible future chancellor, continued his attack.

“The threat is the state can be blackmailed if it is overly generous with help even once,” the media-friendly minister told the Welt am Sonntag newspaper in remarks that have given ammunition to his political foes.

Guttenberg’s comments have gone down well with some in his own conservative camp and could even strengthen his position with them in the long run, especially if he is proved right and the deal turns out badly. 

Merkel has backed him so far, saying on Monday she was grateful to him “for repeatedly sticking his finger in the wound”.

However, he has made himself an easy target for the Social Democrats (SPD), who share power with Merkel’s conservatives but will oppose them in September’s election.

Ministers have been lining up to attack him. SPD Chairman Franz Muentefering accused him of undermining Opel’s negotiating position. Others have portrayed him as a ranting right winger.

Probably most damaging of all, former SPD Chancellor Gerhard Schroeder, one of Germany’s most savvy campaigners, has ridiculed him as the “Baron from Bavaria”, a name likely to stick.

He has homed in on two things that anger many Germans — his aristocratic roots and his wealth, which could prove to be a drawback during an election campaign fought against the backdrop of a deep recession.

Probably more important, Schroeder has reminded voters that Guttenberg is Bavarian. No member of Bavaria’s conservative Christian Social Union (CSU) , sister party of Merkel’s Christian Democrats, has become chancellor, largely because of a strong antipathy among many Germans towards the prosperous, proud southern German state.

It’s not quite as bad as it was back in 2003 when Gerhard Schroeder publicly chastised George W. Bush for invading Iraq and Condi Rice introduced a new policy in the White House called ”ignore Germany” (France was to be punished and Russia forgiven for their opposition to the war).

But relations between Berlin and Washington are probably as poor as they’ve been since Angela Merkel replaced Schroeder in 2005 and set Germany on a course of reconciliation with the United States.

After becoming accustomed to dinners in the White House, barbecues and back-rubs with Bush in his Europe-friendly second term, Merkel and her advisers in Berlin are agonising over a series of slights (perceived or real) from Obama since he came to office in January. 

First came the message from Washington that Obama might not continue the regular videoconferences Merkel held with Bush. In the end the White House came around, but it took two months to set one up.

Berlin also got the cold shoulder when Merkel tried to arrange a trip to Washington ahead of a G20 meeting in London at the start of April. Messages from Berlin with proposed dates went unanswered for days until Merkel’s team abandoned the idea completely, an official close to her told me.

This week came the latest signal, at least from Berlin’s perspective, that the Obama team is not taking German concerns seriously. 

The rescue of Opel, the German unit of U.S. carmaker General Motors, has become the central theme of a slow-to-get-started German election campaign that pits Merkel against her Foreign Minister Frank-Walter Steinmeier. A misstep on Opel and Merkel’s bid for a second term could be doomed.

But when she called an “Opel summit” for Wednesday to try to save the carmaker, her ministers were shocked to see only low-level representation from the U.S. Treasury — a crucial player in the discussions.

Merkel’s team in the Chancellery ended up excluding the envoy from the nitty gritty talks and a teleconference was set up with Ron Bloom, the former investment banker and  United Steel Workers veteran that was brought into the Treasury earlier this year to advise on auto bailouts.

The outrage at the U.S. stance, its nonchalant attitude and lack of preparation for the meeting was palpable in the voices Merkel’s ministers when they emerged from the 12-hour marathon to announce to weary reporters that no deal had been sealed.  

Some in Berlin have suggested that Obama is still punishing Merkel for not allowing him to speak at the Brandenburg Gate when he passed through Berlin last summer in the midst of his rousing campaign for the presidency.

According to this view, her government’s refusal to take on inmates from Guantanamo Bay, the prison for terrorist suspects Merkel lobbied hard to close, has reinforced the resentment in the Obama camp.

This might explain Obama’s decision to avoid Berlin when he visits Germany next week (he will go to Dresden and tour the Buchenwald concentration camp in the eastern state of Thuringia). Because Merkel failed to help him out during his election campaign, Obama is refusing to give her the honour of hosting him during hers.

But the truth may be less complicated. Obama has a daunting list of problems to tackle – from a sinking economy  to a worryingly complex set of foreign policy challenges in North Korea, Pakistan and Iran. Against that backdrop, he may not need Germany or Merkel as much as Berlin would like.

When Cardinal Joseph Ratzinger was elected the head of the Roman Catholicism in 2005, the best-selling daily Bild caught the national mood with a frontpage headline crowing Wir sind Papst! (We're Pope!). Now, Germans are falling out of love with their pope for readmitting to the Church an excommunicated bishop who denies the Holocaust. For the vast majority of Germans, denying the Holocaust is beyond the pale. Shunning anyone who does deny the Holocaust is considered a civic virtue. So seeing the world's most prominent German rehabilitate a Holocaust denier is quite distressing for a upstanding, post-war German democrat. How could he do it?

(Photo: Pope Benedict at the Vatican, 2 Feb 2009/Alessandro Bianchi)

The Vatican and Catholic bishops around the world have been defending the pope, saying the lifting of the excommunications for the controversial Bishop Richard Williamson and three other bishops was an internal Church issue unrelated to his political views. They say repeatedly that this is not a rehabilitation, but simply a readmission to allow discussions on rehabilitation to start. After botching the initial announcement, the Vatican has had a tough time trying to convince public opinion in other countries. In Germany, where many understandably think Holocaust deniers deserve no sympathy whatsoever, this task is proving to be doubly difficult.

From Chancellor Angela Merkel and former Foreign Minister to leading Catholic thinkers, Jewish groups and editorial writers in top-selling newspapers -- they're all criticising the pope's controversial decision to welcome Williamson back. Here is our news story from Berlin wrapping up the reaction. In Rome, another German, Cardinal Walter Kasper, bluntly told Vatican Radio: "There wasn't enough talking with each other in the Vatican and there are no longer checks to see where problems could arise."

(Photo: Hans-Dietrich Genscher and Angela Merkel, 21 Oct 2008/Tobias Schwarz)

While Kasper takes a jab at Ratzinger now and then, it's rare to see such a wide variety of opinion lining up in Rome and in other countries against a pontiff. It is almost unthinkable that a head of government should break with protocol and openly criticise a pope. But when a German pope ignores one of the deepest German taboos, getting a reaction like this is -- as they say here in Germany -- "as certain as hearing 'Amen' in church."

There have been so many comments that we couldn't fit them all into our news stories. Here are some of the comments from Germany:

• Merkel says says it's all about "the pope and the Vatican making very clear that there can be no (Holocaust) denial and that there must be positive relations with Judaism."
• Genscher writes: "Poles can be proud of Pope John Paul II. At the last papal election, we said "We are the pope!" But please -- not like this."
• Politicians from the Greens, the Left, the Social Democrats, the Free Democrats and even the Christian Democrats (CDU/CSU) criticise the pope's decision. The CDU/CSU expert on church affairs, Ingrid Fischbach, said she was appalled and added: "This has disappointed me, a believing Catholic, very personally."
• German newspapers have also joined in, including the top-selling popular daily Bild, whose editorial entitled "Infallible?" said "It is morally the last straw, the most despicable thing possible, when one relativises the racist murdering of and deadly envious fury against the Jews... The pope must correct his mistake, take back the decision and apologise."
• The respected theologian Hans Maier said the handling of the affair was "an unforgivable failure, a political blunder ... Why didn't they get a broad consensus on these issues in advance? Such an important and decisive question must be discussed in a broader group of people."
• Papal biographer Peter Seewald, author of two long interview book with Ratzinger entitled Salt of the Earth and God and the World, said the pope was badly advised: "This shows clearly that they're not very professional behind the walls of the Vatican. There's even some naïvité. This crisis could easily have been avoided with more precision. We have to get used to the idea that Benedict's papacy will not be calm and quiet."

The German service of Vatican Radio, which describes itself as "the voice of the pope and the world Church" (see logo below), gave in today's news summary another explanation of the pope's view by Vatican spokesman Rev. Federico Lombardi and a postive comment by Vatican Secretary of State Tarcisio Bertone ("For me, the issue is over"). It followed that by 10 -- count 'em, 10 -- critical comments from top German clergy condemning Williamson's Holocaust denial and demanding full support for the Second Vatican Council and no concessions to the ultra-traditionalists. The radio quoted Mainz Cardinal Karl Lehmann, Cologne Cardinal Joachim Meisner, Munich Archbishop Reinhard Marx, Bamberg Archbishop Ludwig Schick, Hamburg Auxiliary Bishop Hans-Jochen Jaschke, Münster Bishop Felix Genn, Magdeburg Bischof Gerhard Feige, Limburg Bishop Franz-Peter Tebartz-van Elst, Osnabrück Bishop Franz-Josef Bode and Paderborn Archbishop Hans-Josef Becker. They naturally don't attack Benedict openly, but it's hard to remember when the pope's own radio station carried this many verbal nudges and winks and stage whispers from fellow Church leaders aimed in his direction.

What next? What should Benedict do when even his "home team" tells him he's gone way out of bounds?

As Germany’s foreign minister, Frank-Walter Steinmeier has delivered many speeches,  but none that anyone can particularly remember. Germany’s top diplomat has impeccable credentials yet has rarely come close to stirring anyone with his balanced, cautious, usually dry and sometimes rather dull addresses. No one would ever think of ticking the box “rousing speaker” next to his name.

That all changed on Saturday — when Steinmeier gave the speech of his life to a congress of his centre-left Social Democrats (SPD). The 500 delegates interrupted the white-haired lawyer’s riveting 88-minute address with applause 114 times. They then elected Steinmeier, who had never won election for any public office, as their candidate for the 2009 election with 95 percent of the vote.

By brilliantly latching on to the dominant issue of the moment — the global financial crisis – Steinmeier told the SPD delegates who have suffered post-war record lows in opinion polls this year and are worrying about their own job security in next year’s elections that it is the SPD more than any other party that is ideally positioned to benefit from the banking crisis. The SPD has long pushed for more state controls, he reminded them, and always stood up to protect the proverbial “little guy”.

“Let’s close our flanks, let’s not settle for second place but rather let’s fight for the victory next year,” Steinmeier told the delegates, who gave him a five-minute standing ovation for the fiery address.

It was also more than the usual vague piddle-paddle that German leaders often offer up. Steinmeier, until now seen more aligned to the conservative wing of the SPD, gave the party’s left plenty to cheer about. He spoke out clearly against extending nuclear power, unambiguously endorsed Gesine Schwan as the party’s candidate for the office of president even though SPD conservatives would prefer her withdrawal, and promised new government spending to boost the economy.

“People are looking to us to lead them through the crisis and we can do it. We’ve buried our differences. We believe in ourselves again and that’s making us strong. At critical moments we’ve been the ones that provided the answers.” Before Saturday the SPD had been a party in disarray. They had struggled to make their mark with voters. Trailing Chancellor Angela Merkel’s Christian Democrats by about 10 points in opinion polls, the party has been deeply frustrated, fed up with Merkel getting much of the credit for the achievements of their grand coalition.

“I was extremely impressed with his speech,” said former Chancellor Gerhard Schroeder, who sat cheering Steinemeier in the front row with another ex SPD chancellor, Helmut Schmidt. An accolyte of Schroeder’s, Steinmeier served as his chief of staff. Before Saturday, he was seen as a steady pair of hands, holding an office (foreign minister) that almost automatically makes him one of the country’s most popular leaders. Before Saturday he was respected, admired perhaps.

He has now added a new attribute to his résumé: “rousing speaker”.

The European Union has come under sharp criticism for having a fragmented approach to the financial crisis. It is exemplified by Ireland’s go-it-alone decision to guarantee all accounts and Germany’s surprise announcement after a meeting of leading members that it was taking unilateral action too.

Relief, then, that the 27 member states issued a statement on Monday that they would do what it takes to bolster citizens’ savings and build financial stability. Only problem was, they could not coordinate the announcement. First Italian Prime Minister Silvio Berlusconi released it, then Portugal. Only after a while did French President Nicholas Sarkozy weigh in. He does head the current EU presidency after all.

No wonder Washington called for more coordination.

Suddenly, the outlook has darkened for Chancellor Angela Merkel, thanks to Bavaria’s conservatives who suffered their worst result in half a century in a state vote on Sunday.

Merkel is used to riding high in polls and had looked to be cruising to re-election in a year’s time.

But the disaster in Bavaria, plus a clouded economic outlook due to financial crisis around the globe leave Merkel looking vulnerable and open to attack from within her conservative camp.

The prospect of a reinvigorated Social Democrat (SPD) party, with whom she shares power in a loveless coalition, under its new leadership is yet another headache.

Merkel’s enviable status as Germany’s most popular post-war chancellor isn’t helping her party which is languishing at around 37 percent in polls while the SPD, although weaker, is starting to make gains.

And the 17 percent slump in support for Bavaria’s Christian Social Union (CSU), sister party of Merkel’s Christian Democrats (CDU),  is part of a trend.

This year, conservatives have endured heavy losses in all four states that have held elections and lost their absolute majority in Hamburg as well as Bavaria. Within weeks, the CDU could also lose power in Hesse where the SPD is expected to clinch a deal to oust CDU state premier Roland Koch after a knife-edge result in a Janaury vote.

Another left-right “grand coalition” looks more likely than ever as Merkel relies on the CSU – which accounts for more than 20 percent of the conservative bloc in parliament — for power.

If, as usual, the CSU performs worse in federal elections than in the state vote, Merkel could face a struggle to form the coalition she wants — with the liberal Free Democrats.

Merkel, who as the female,  Protestant leader of a predominantly male, Catholic party, has always struggled to fit in, may face still more unrest within the conservative camp.

Already Christian Wulff, a top CDU figure and head of Lower Saxony, has laid the blame for Bavaria on Merkel, saying the losses were partly due to compromises struck by her coalition.

The chancellor may also have made a mistake in slapping down CSU demands for tax cuts as now she will face a more cantankerous CSU which is likely to push harder for those tax cuts and could block other reforms.

Bavarian conservatives probably have the worst behind them but Merkel may have the worst still to come.

Today’s European edition of the International Herald Tribune is fronted by a photo montage of the presidents of Senegal, Afghanistan, Bolivia, Argentina, France and Brazil.

They have two things in common - all are attending this week’s United Nations General Assembly in New York and all see a global threat from the financial crisis that began on Wall Street and, in the words of President Gloria Macapagal Arroyo of the Philippines, has moved “like a terrible tsunami around the globe”.

Some of the strongest words were directed at Washington lawmakers, Wall Street speculators and market regulators.

French President Nicolas Sarkozy has called for those responsible for the crisis to be punished. Chancellor Angela Merkel of Germany has said to the United States and Britain: “I told you so”.

Her finance minister, Peer Steinbrueck, believes the United States has lost its financial superpower status.

Bolivia’s President Evo Morales has been quoted as saying: “There is an uprising against an economic model, a capitalistic system that is the worst enemy of humanity.”

How does this fit with Secretary of State Condoleezza Rice’s assurance that the world still has confidence in the United States?

Who needs to adjust their lenses?

German Chancellor Angela Merkel sent a clear “I told you so!” to the United States and Britain at the weekend, criticising them in unusually frank terms for resisting measures that might have contained the current financial crisis. The conservative leader of Europe’s largest economy reminded her partners that she had pushed for steps to boost the transparency of hedge funds during Germany’s presidency of the Group of Eight last year. ”We got things moving, but we didn’t get enough support, especially in the United States and Britain,” she told the Muenchner Merkur newspaper. Merkel expanded on her point in a speech in Austria, suggesting that both Washington and London were only now coming around to her view.

“It was said for a long time ‘Let the markets take care of themselves’ and that there is ‘no need for more transparency’…Today we are a step further because even America and Britain are saying ‘Yes, we need more transparency, we need better standards for the ratings agencies’.

Germany had made greater transparency a key theme of its rotating presidency of the G8, which includes the United States, Japan, Germany, Britain, France, Italy, Canada and Russia. Berlin had expressed fears that hedge funds could threaten the stability of the financial system through their heavy reliance on borrowing to finance risky trading strategies. But it ran into resistance from the United States and Britain, achieving little.

Whether Merkel’s G8 initiative could have averted or limited the current financial market crisis if it had been successful is certainly debatable. But reminding voters that she had sought to address the problem as early as last year could help Merkel score points on the domestic front ahead of a general election next year. Merkel’s Christian Democrats (CDU) rule in an uneasy grand coalition with the Social Democrats (SPD), and both sides have been trying to play up their own role as crisis manager in the current financial market turmoil.

Both Merkel and her SPD finance minister, Peer Steinbrueck, have tried to take credit for Germany’s efforts last year to agree better transparency rules for financial markets. SPD budget expert Carsten Schneider praised Steinbrueck’s efforts during Germany’s G8 presidency in a newspaper interview on Monday, adding: “At the time, the United States and Britain demonised every effort to agree more transparency and rules.”

As Germany’s election approaches, the “I told you so!” Berlin seemed to send to Washington and London on the weekend could turn into an “I told you so first!”-competition between Merkel’s CDU and her SPD rivals.

There was an awkward moment on Sunday, when Georgian President Mikheil Saakashvili stood next to German Chancellor Angela Merkel in Tbilisi and thanked her for having “initiated” plans to bring his country into NATO.

Anyone who followed NATO’s last summit in Bucharest back in April knows that it was Merkel who broke with Washington and spearheaded opposition to such a move.

Shifting uncomfortably, Merkel couldn’t help but interject: “Give credit where credit is due,” she said curtly, taken aback by Saakashvili’s strange distortion of her stance.

The moment was instructive, underlining one of the main reasons why Berlin remains opposed to giving Georgia a seat in the military alliance anytime soon.

Merkel continues to view Saakashvili and his U.S.-backed bid to join NATO with a good dose of scepticism — a view reinforced by the Georgian president’s actions and rhetorical eruptions since his violent showdown with Moscow began earlier this month.

Last week, the Georgian president drew parallels between Europe’s reaction to the conflict and its appeasement of Hitler in the run-up to World War Two — not the best way to win friends.

Merkel did offer Saakashvili some of her most encouraging language to date on his NATO aspirations, saying Georgia was on a “clear path” to membership. But it would be wrong to read too much into that.

One senior German official told me that Merkel warned President George W. Bush repeatedly last year about relying too heavily on Saakashvili. 

“Don’t tell me you told me so,” Bush sheepishly told the German chancellor, this official recounted, after the Georgian leader declared a state of emergency in November and cracked down on opposition protesters.

That challenge to Saakashvili faded and he was reelected to a new term as president in January in a vote deemed broadly fair, but that did not allay German concerns about his fitness to lead. Some officials in Berlin and other capitals may be quietly hoping Georgians rise up against Saakashvili again in the wake of his brief but bloody war with Russia. 

Perhaps NATO can avoid another embarassing public spat over Georgia’s bid when it meets in Brussels at the end of the year. By then, tensions in Georgia’s breakway provinces may have eased somewhat, along with Moscow’s readiness for confrontation.

More likely, NATO will struggle again to paper over its divisions on Georgia, particularly if Republican John McCain — a friend of Saakashvili and ardent supporter of his government — wins the U.S. election one month before the summit.

The ferocity of the reaction in the German media to the fortress-like new U.S. embassy in Berlin, which former U.S. President George Bush will inaugurate on Friday, strikes me as a reflection of the strains in German-U.S. relations since 2003’s Iraq conflict.

It underlines just how long gone the days of the Cold War really are. Then, when Berlin was the front line in the Cold War, America was West Germany’s best friend and U.S. soldiers were welcome across the country.

Architectural crticis in Germany have slammed the boxy building with narrow windows as being reminiscent of Baghdad’s Green Zone.

The embassy is a picture of a country traumatised by 9/11 and by the consequences of globalisation, of a nation with such heavy armour that it can no longer see the world,” wrote conservative Frankfurter Allgemeine Zeitung earlier this year.

Other critics have been just as hostile, deriding it as a discount supermarket, a prison, a bunker and like Fort Knox.

Admittedly, the beige building — in the heart of the city next to the Brandenburg Gate and just metres from where the Berlin Wall used to stand — looks rather bland and the metal bollards emphasise the barrier between the embassy and Berlin’s residents and tourists. But it isn’t so different from U.S. embassies in other European capitals which have boosted security.

Germans who fondly remember former U.S. President John F. Kennedy declaring “Ich bin ein Berliner” in 1963 and former President Ronald Reagan calling on the Soviet Union’s Mikhail Gorbachev to “tear down this wall” in 1987 long for an improvement in trans-Atlantic relations.

U.S. officials hope the new building will show America’s “warmer, fuzzier” side, although whether either the embassy building or November’s U.S. election will herald a significant improvement in ties is another matter.

And as if the embassy, which cost about 80 million euros and only went ahead after a protracted and ugly public dispute with Berlin officials about how to make the embassy secure without moving two busy nearby streets 30 metres away, hasn’t courted enough controversy, Michael Reagan, son of the former president, was this week reported as saying Berlin should commemorate his father’s contribution to bringing down the Soviet Union and the Berlin Wall. Here’s the piece from Der Tagesspiegel.

The Cold War is over. There is a chill in German-U.S. relations.