BERLIN (Reuters) - Keen to use its presidency of the U.N. Security Council to demonstrate its commitment to multilateralism, Germany has laid itself bare to criticism from disenchanted allies of double standards on defense spending, energy and arms exports.

FILE PHOTO: Pipe assembly is pictured aboard the NordStream 2 pipe laying vessel Audacia close to Ruegen island in the Baltic Sea, Germany, November 13, 2018. REUTERS/Axel Schmidt/File Photo

Powerful business interests and the compromises needed to hold together conservative Chancellor Angela Merkel’s loveless coalition with the Social Democrats (SPD) have led to go-it-alone decisions that have angered the United States, France, Britain and other Europeans.

Merkel won plaudits in Davos in January and a standing ovation at the Munich Security Conference in February for strong appeals to maintain the post-World War Two rules-based international order.

Her SPD foreign minister, Heiko Maas, is singing from the same hymn sheet.

“When faced with a new order in which great-power rivalry is back on the agenda, our response shouldn’t be: my country first. It should be a close alliance of all those committed to a rules-based international order,” he said in New York this week.

Such rhetoric rings hollow for some.

An unwavering commitment to the NordStream 2 gas pipeline from Russia has angered the United States, Ukraine and eastern European partners. A freeze on arms exports to Saudi Arabia after the murder of journalist Jamal Khashoggi led Paris to accuse Berlin of jeopardizing joint tank, combat jet and drone development.

Germany’s long insistence on austerity and refusal to rein in its large current account surplus, which reflects its export prowess, have perpetuated a view among euro zone peers that they must play to Berlin’s tune.

“IN DENIAL”

Berlin has also exasperated close allies by pouring cold water on deeper euro zone reform ideas from France, and especially by rowing back on NATO defense spending goals.

Not to mention Merkel’s unilateral disavowal of EU rules in 2015 which let migrants enter Germany, a move which most commentators say contributed to the rise of the far right.

Constanze Stelzenmueller, senior Robert Bosch Fellow at the Brookings Institution, said it is an “ultimately misguided and only semi-functional attempt” to articulate a foreign policy opposed to U.S. President Donald Trump’s “America First” stance.

“No other country has been so deeply in denial about the tension between its high-minded normative convictions and its own selective compliance with them,” she said, adding that other European countries are looking to Germany for leadership.

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“Germany today is - for all its wealth and power, including soft power - also increasingly lonely, overwhelmed and beset by internal rifts,” she said, adding it risked being shaped by events, competitors and adversaries.

In its one-month presidency of the U.N. Security Council which started on Monday, the spotlight will be on Germany if any Security Council response is needed to global crises.

But with the legacy of the Nazi era and World War Two still weighing on it, Germany is wary of being seen as too assertive on the world stage. As it struggles to find a role to match its economic might, its foreign policy is deeply embedded in international bodies such as the EU, NATO and United Nations.

CREDIBILITY AT STAKE

So why, ask critics, did SPD Finance Minister Olaf Scholz last month announce plans which mean Germany will fall even shorter of a NATO goal of spending 2 percent of economic output on defense in coming years than it was previously going to?

Having previously said it would reach 1.5 percent by 2024, Scholz’s plans now see a decrease to 1.25 percent of gross domestic product by 2023.

“It doesn’t serve German credibility if we start questioning the goal of 1.5 percent by 2024 after committing to the 2 percent goal in 2014,” said Roderich Kiesewetter, a senior lawmaker in Merkel’s conservative party.

It gives ammunition to Trump, who singles out Germany for “not paying its fair share”. U.S. Vice President Mike Pence said this week Germany was a top offender, pointing out it had for generations benefited from U.S. protection of Europe.

“Whether Scholz is pandering to his own pacifist wing of his party or its anti-Americanism base, or has his sights on the chancellery, Germany’s credibility inside NATO is being dented,” wrote Judy Dempsey, a senior fellow at Carnegie Europe.

The government insists it is committed to the 2024 goal. Maas says Germany has raised defense spending by nearly 40 percent since 2014 and the defense budget will continue to rise -- but the debate exposes a classic German dilemma.

“After World War Two and the Nazi era, it’s in our political DNA that military solutions are almost never the answer, rather political solutions,” said senior SPD lawmaker Thomas Oppermann.

Another major driving force is business.

Berlin has long sought to protect its powerful car industry from EU attempts to curb emissions and has also dug in its heels in over a pipeline that will secure supplies of Russian gas needed by German industry - and bypass Ukraine.

Brushing aside opposition from the United States, eastern European and Baltic states who warn that Europe will become over dependent on Russian energy, Merkel has let firms, including Uniper and BASF’s Winterhall unit, push ahead with NordStream 2.

Even after the EU imposed sanctions on Russia for annexing Crimea in 2014, Merkel insisted it was a commercial project and only last year acknowledged it had a political element and saw the need to reassure Ukraine on transit revenues.

“Allowing it to trundle along was a mix of business driving it hard and the government taking its hands off, hoping for the best - and that turned out not to be,” said Stelzenmueller.

One other factor affecting policy is Merkel’s reliance on the SPD as a coalition partner, seen in last week’s extension of an arms exports ban to Saudi Arabia.

The original ban last year, which took European partners by surprise, prompted London and Paris to warn that billions of euros of military orders were in danger.

While the SPD, seeking to win over traditional voters for regional and European elections later this year, insisted on extending the ban, they bowed to pressure from France and Britain and allowed loopholes for joint projects.

However, if Merkel is to fulfil her aim of joint European development and export of defense equipment, she may have to convince Germans to change their mindset.

“It won’t work if Germany says we are passionate Europeans but only on our terms. We must get used to the idea that we have to compromise,” said Oppermann.