End of Europe? Berlin, Brussels' shock tactic on migrants

BRUSSELS/BERLIN (Reuters) - Is this how "Europe" ends?

The Germans, founders and funders of the postwar union, shut their borders to refugees in a bid for political survival by the chancellor who let in a million migrants. And then -- why not? -- they decide to revive the Deutschmark while they're at it.

That is not the fantasy of diehard Eurosceptics but a real fear articulated at the highest levels in Berlin and Brussels.

Chancellor Angela Merkel, her ratings hit by crimes blamed on asylum seekers at New Year parties in Cologne, and EU chief executive Jean-Claude Juncker both said as much last week.

Juncker echoed Merkel in warning that the central economic achievements of the common market and the euro are at risk from incoherent, nationalistic reactions to migration and other crises. He renewed warnings that Europe is on its "last chance", even if he still hoped it was not "at the beginning of the end".

Merkel, facing trouble among her conservative supporters as much as from opponents, called Europe "vulnerable" and the fate of the euro "directly linked" to resolving the migration crisis -- highlighting the risk of at the very least serious economic turbulence if not a formal dismantling of EU institutions.

Some see that as mere scare tactics aimed at fellow Europeans by leaders with too much to lose from an EU collapse -- Greeks and Italians have been seen to be dragging their feet over controlling the bloc's Mediterranean frontier and eastern Europeans who benefit from German subsidies and manufacturing supply chain jobs have led hostility to demands that they help take in refugees.

Germans are also getting little help from EU co-founder France, whose leaders fear a rising anti-immigrant National Front, or the bloc's third power, Britain, consumed with its own debate on whether to just quit the European club altogether.

So, empty threat or no, with efforts to engage Turkey's help showing little sign yet of preventing migrants reaching Greek beaches, German and EU officials are warning that without a sharp drop in arrivals or a change of heart in other EU states to relieve Berlin of the lonely task of housing refugees, Germany could shut its doors, sparking wider crisis this spring.

GERMAN WARNINGS

With Merkel's conservative allies in the southern frontier state of Bavaria demanding she halt the mainly Muslim asylum seekers ahead of tricky regional elections in March, her veteran finance minister delivered one of his trademark veiled threats to EU counterparts of what that could mean for them.

"Many think this is a German problem," Wolfgang Schaeuble said in meetings with fellow EU finance ministers in Brussels. "But if Germany does what everyone expects, then we'll see that it's not a German problem -- but a European one."

Senior Merkel allies are working hard to stifle the kind of parliamentary party rebellion that threatened to derail bailouts which kept Greece in the euro zone last year. But pressure is mounting for national measures, such as border fences, which as a child of East Germany Merkel has said she cannot countenance.

"If you build a fence, it's the end of Europe as we know it," one senior conservative said. "We need to be patient."

A senior German official noted that time is running out, however.

"The chancellor has been asking her party for more time," he said. "But ... that narrative ... is losing the persuasiveness it may have had in October or November. If you add in the debate about Cologne, she faces an increasingly difficult situation."

He noted that arrivals had not fallen sharply over the winter months as had been expected.

"You can only imagine what happens when the weather improves," he said.

SCHENGEN FEARS

Merkel and Juncker explicitly linked new national frontier controls across Europe's passport-free Schengen zone to a collapse of the single market at the core of the bloc, and of the euro. Both would ravage jobs and the economy.

"Without Schengen ... the euro has no point," Juncker told a New Year news conference on Friday. Historic national resentments were re-emerging, he added, accusing his generation of EU leaders of squandering the legacy of the union's founders, survivors of World War Two.

Merkel has not suggested -- yet -- that Berlin could follow neighbors like Austria and Denmark in further tightening border checks to deny entry to irregular migrants. But she has made clear how Europe might suffer.

"No one can pretend that you can have a common currency without being able to cross borders relatively easily," she said at a business event last week.

In private, German officials are more explicit. "We have until March, the summer maybe, for a European solution," said a second German official. "Then Schengen goes down the drain."

A senior EU official was equally blunt: "There is a big risk that Germany closes. From that, no Schengen ... There is a risk that the February summit could start a countdown to the end."

The next summit of EU leaders one month from now follows meetings last year that were marked by agreement on a migration strategy as well as rows over failures to implement it.

Of the 160,000 asylum seekers EU leaders agreed in September to distribute among member states, fewer than 300 have been moved.

Berlin and Brussels continue to press for more distribution across Europe. But few place much hope in that -- one senior German official calls it "flogging a dead horse".

TURKISH KEY

EU leaders' hope is for help from Turkish President Tayyip Erdogan, a man many of them see as an embryonic dictator.

Berlin is pressing for more EU cash for Ankara, beyond an agreed 3 billion euros, which Italy is blocking. Some Germans suggest simply using German funds to stem the flow from Turkey.

EU officials say it is too early to panic. Arrivals have fallen this month. U.N. data show them running in January at half the 3,500 daily rate of December. Progress includes a move to let some of the 2.1 million Syrian refugees in Turkey take jobs. The EU will fund more schools for refugee children.

Yet EU Migration Commissioner Dimitris Avramopoulos, who travels to Berlin on Monday, told the European Parliament last week: "The situation is getting worse."

The refugee crisis was jeopardizing "the very core of the European Union", he said, offering no grounds to be optimistic other than that "optimism is our last line of our defense".

(Additional reporting by Gabriela Baczynska, Paul Taylor and Tom Koerkemeier in Brussels; Writing by Alastair Macdonald; Editing by Sonya Hepinstall)