GERMANY: THE MERKEL LEGACY


The volume of post-mortems about Angel Merkel’s decision to stand down as leader of the CDU may have been rather too plentiful, especially as it is her intention to remain as Chancellor until the scheduled end of this legislature in 2021. Nevertheless it offers an opportunity to take stock of where the German economy stands, and how the political landscape has changed.


When the history books on the Merkel era are written, the judgement may well be harsh and less than complementary. But it also has to be said that even now Merkel’s approval rating remains way above most of her peers in her own party and across the political spectrum, and that in many aspects, her calm, very uncharismatic demeanour has always appealed to the German general public’s deep seated tendency to an often rather too complacent, small ‘c’ conservatism (a variation on ‘if it’s not broke, don’t fix it’). Nevertheless as party leader she has been ruthless in seeing off any challengers to her position, just as much as her predecessor Helmut Kohl, and to a degree this has allowed her to fashion her gradual departure from front line politics, as well as raising many questions about who or what will fill the void that her departure creates. That said, the fragility of the current grand coalition may still result in a more abrupt exit, regardless of whoever takes over as leader of the CDU.


The contraction in Q3 2018 GDP may well prove to be a transitory phenomenon, rather an augur of a more protracted period of weak growth (though I have some very serious doubts), let alone anything that might be called a recession, particularly as it was a function of the auto industry’s struggles to comply with new EU emissions regulations. But it also serves as a prompt to dig a little deeper into the health of the German economy, above all from the aspect of Merkel’s legacy, and from the perhaps stereotyped perception of Germany as the engine of Eurozone growth, and the often rather envious view of its economic strength.


For all that Merkel’s downfall is seen by many as inextricably linked to opening Germany’s borders to the huge influx of immigrants and refugees from the Middle East in 2015, which in turn is identified as being among the key drivers of the rise in support for the far right AfD, this is a sweeping generalization that does not stand up to closer scrutiny. The facts speak far more to a generalized failure by successive Merkel governments to address an array of much needed domestic reforms, some of which are legacy issues related to reunification.


Any visitor to Berlin in 2018, who had previously been to the city say 20 years ago, cannot fail to be impressed by the now very modern, but magnificent capital city which has emerged. That said, the ‘to date’ cost of reunification is estimated at some EUR 2.3 trillion, just in terms of transfers from West to East. It also has to be emphasized that this remains an ongoing process, as every German income taxpayer is made aware of via the 5.5% solidarity tax surcharge that continues to be deducted every month. (That is down from 7.5% in 1991, and there are also rebates for low income taxpayers, but that is not the point). What has been achieved in Dresden and Leipzig is equally impressive, but a closer look at the hinterland, above all in terms of unemployment rates underlines that this process of reunification has been very uneven, and this is also mirrored in parts of the former West Germany.


4 | ADMISI - The Ghost In The Machine | November/December 2018


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