* Merkel unnerved markets before Irish bailout
* Timing and tone of euro comments criticised
* Stance addresses political, legal problems at home
By Stephen Brown
BERLIN, Nov 28 (Reuters) - Angela Merkel did not make many friends in Europe in the run-up to the Irish bailout, but her severity and insistence on private investors sharing the risk were well pitched to address political concerns in Germany.
Finance Minister Wolfgang Schaeuble's first reaction to the Irish deal was that it reassures taxpayers Europe has learnt the lessons of the financial crisis and "shows the European policy of the German government led by Angela Merkel is a clever one".
Merkel roiled currency and bond markets ahead of the Irish rescue package by stressing the "exceptionally serious" plight of the euro and the need for investors to face losses in any future sovereign debt crisis in the euro zone.
Her message itself -- including that dealers in government bonds should not be "the only business in the world economy that involves no risk" -- does strike a chord with many in Europe.
But the tone and timing of the utterances by the leader of the biggest economy in Europe -- which emerged from the global downturn in much better shape than its peers -- has left many European policymakers asking whose interests she has at heart.
Eurogroup President Jean-Claude Juncker told one German paper this week he was worried that the German leadership was "slowly losing sight of the European public good".
Editorials in papers across the region have wondered aloud whether Germany's new-found assertiveness, belatedly matching its economic leadership with geopolitical clout, was positive or whether Germany would not become the "executioner" of the euro.
"Are you people still for Europe?" is a question one German minister of state, Werner Hoyer at the foreign ministry, says he is frequently asked in Brussels these days.
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"We have a communications problem," Hoyer told Der Spiegel magazine, adding that Berlin needed to "squash any doubts about its enthusiasm for Europe quickly and decisively".
"At the moment Merkel is being watched in Europe. People expect a lot from her but are also unsparing in their critique," said Silvana Koch-Mehrin, a member of the European parliament for Merkel's centre-right coalition.
The Sueddeutsche Zeiting newspaper wrote in an editorial that Germany's European partners appreciated that its economic strength was essential for the survival of the euro, but still had a tendency to resent its increasingly outspoken leadership.
"Germany's strength is at the same time a cause for irritation and for hope," it wrote, adding that Merkel about the need for "punishment, discipline and severity" in Europe for a domestic German audience tired of being the euro's paymaster.
German public support for solidarity with the likes of Greece and Ireland is precarious: in an opinion poll for Focus magazine, 48 percent were in favour and 47 percent against.
Dramatic warnings from Merkel, such as "if the euro fails, then Europe fails", clearly serve to remind this doubtful public that Germany has no choice but to guarantee first the Greek, then the Irish, and who knows what future eurozone bailouts.
"The euro is more than paper and coins, it is a currency for peace," said Foreign Minister Guido Westerwelle on Saturday.
Gerd Langguth, a political scientist and Merkel biographer, said that more than worrying about her popularity in Europe, the chancellor's first concern were potential concerns about euro zone bailouts raised by Germany's constitutional court.
It already has a ruling pending on the existing euro zone rescue mechanism and a negative decision would block any German participation and plunge the euro zone deeper into crisis.
"Merkel is thinking first of the German constitutional court and secondly of German voters," said Langguth.
He blames Merkel's loss of the state government in North Rhine-Westphalia this year on the Greek crisis and sees her tough euro stance on the euro as a political strategy ahead of half a dozen state elections around Germany in the next year.
In this challenging political context, Merkel is unlikely to soften her tone on Europe any time soon.
"The more Europe discusses how stable the euro is or not, the more the euro can be destabilised," said Langguth. "On the other hand, I think this discussion cannot be prohibited for Germany, which knows it will end up paying this crisis money."
(Editing by Ron Askew)