Three years after she announced that she would not stand again for re-election the moment of truth has finally come for Angela Merkel who will stand down as Chancellor once a government is formed following Sunday’s election (note: past experience suggests it could take a while before this is finally achieved). It is difficult to predict the election outcome: The SPD, which has been languishing in the polls for years, has enjoyed a slight lead over the CDU/CSU in recent weeks but with no party currently polling more than 25% (chart below) many different combinations of government are still possible.
The collapse in support for the CDU/CSU to its lowest recorded level on data back to 1994 is remarkable: Just six weeks ago they enjoyed a six point lead over the SPD. This is at least partly due to the fact that Merkel’s prospective successor, Armin Laschet, is unpopular. Pollsters reckon that around one-third of voters who backed the CDU in the 2017 election did so because of Merkel. Her absence from the ballot paper could cost the party dearly. Whilst Merkel enjoyed a high reputation abroad, her reputation at home looks very solid too. Indeed the latest domestic poll gives her an approval rating of 80% versus only 17% who do not think she is doing a good job. She is also judged to be far and away the most competent of all Germany’s leading political figures, scoring +2.4 on a scale of -5 to +5, compared to Laschet’s dismal showing of -0.4 and some way ahead of the SPD’s candidate for Chancellor, Olaf Scholz, at +1.6.
To some extent this is a reflection of the incumbency effect – Merkel has, after all, occupied the Chancellor’s office since 2005. She took up the post in what are now fondly described as the good old days: before the financial crash; before the euro zone debt crisis; pre-Trump and pre-Brexit. Merkel has subsequently dealt with all of these international crises in a calm, pragmatic fashion, steering Germany through the storms. For that alone, she will be missed at home. But she will also be a big loss on the international stage where leaders with a reassuring presence have been in short supply of late (think Trump or Johnson).
But it has not all been plain sailing. Germany’s role as Europe’s political and economic leader has been reinforced during Merkel’s term, largely by default as traditional international players such as the UK and France became more inward looking. However, she has appeared reluctant to embrace the role. This is in keeping with her natural caution. Merkel has never been one for the grandiose vision and as an apparently keen student of history, she is well aware of the backlash that would emerge in certain quarters if Germany were to start throwing its weight around on the international stage.
... though not necessarily the most economically astute
Her biggest policy error was the handling of the Greek debt crisis. The German government’s insistence that Greece live up to its obligations under EU law may have been in keeping with the letter of the law but was not in keeping with its spirit. Insistence on a punishing austerity programme condemned Greece to an economic depression from which it has yet to recover. For someone with an appreciation of history, this was an uncharacteristic error. As the German economic historian Albrecht Ritschl has pointed out, the cancellation of Germany’s post WW2 debt laid the foundation for the Federal Republic’s modern economy giving rise to the charge of hypocrisy. More seriously, the Greek episode raised many question marks about the future of the euro zone, few of which have been satisfactorily answered. Merkel’s tactics during the debt crisis may yet prove to be very short sighted.
Indeed, Merkel has never shown any great aptitude for economic issues. She came to office in 2005 on the back of the reforms initiated by her predecessor Gerhard Schrรถder who initiated a programme to boost renewable energy and introduced the painful Hartz IV labour market reforms that did so much to boost German competitiveness. In many ways Merkel reaped the reward of these policies without having to do much herself and she has been far less willing to engage in reform, preferring to maintain the status quo. On energy policy, Merkel’s government did pass legislation in 2010 in support of the Energiewende to continue the process of transforming Germany into a low carbon economy. However, in the wake of the Fukushima nuclear disaster in Japan, Merkel promised to shut Germany's fleet of nuclear reactors by 2022 which resulted in a slower phasing out of coal and fossil gas generation than originally planned. Consequently, the pace of reduction in German CO2 emissions has slowed over the past decade compared to the previous decade.
Domestic fiscal policy has largely acted with restraint. Germany’s “schwarze Null” budget policy, which aims for balance or a small fiscal surplus, coupled with the debt brake effectively acted as a restrictive financial straitjacket at a time when the economy has tended towards deflation and when infrastructural investment needs have mounted. During a period when Germany has run a significant current account surplus, the government has come under pressure to run a more expansionary fiscal policy but Merkel’s administration has consistently rejected demands to do so. That said, she has proven pragmatic in providing fiscal support when the economy most needed it, particularly in the wake of the 2008 crash and again during the corona pandemic.
Measuring the balance
Although Merkel has not had to be a reforming Chancellor, Germans have little cause for complaint. Indeed, she should be given credit for not derailing the reforms put in place by previous governments. Perhaps one reason for Merkel’s popularity is that she has managed to maintain the status quo by insulating voters from the changes going on around them. For example, Brexit could never happen in today’s Germany whilst Merkel (perhaps reluctantly) made the call to uphold western values at a time when Donald Trump proved unable to do so. The decision in 2015 to open up Germany’s borders to refugees should also be viewed as a great humanitarian gesture. But as The Economist (slightly harshly) put it, “admiration for her steady leadership should be mixed with frustration at the complacency she has bred.”
After 16 years during which Merkel has kept the plates spinning, it will now be up to someone else to tackle the many problems which Germany – in common with all western economies – faces. Whoever the new Chancellor is will not have the personal authority or Merkel’s depth of experience in dealing with crises. They will also have to come to terms with the changed nature of the EU as neighbours such as Poland and Hungary drift away from the EU centre. The new Chancellor will be required to deal with the many issues which are likely to arise in the wake of the pandemic, particularly with regard to the euro zone which has morphed closer to a fiscal union in the last 18 months.
Merkel's successor will do well to be credited with a verb describing their mode of government – to merkeln. It may originally have been coined as a derogatory term to describe one who leads without taking decisions, but there are sometimes worse ways of doing government, as Boris Johnson and Donald Trump have demonstrated.
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