Merkel’s Germany

Many commentators as well as politicians— and not just in Europe—have recently treated Germany as a universal yardstick, commending the largest country on the old continent for its outstanding results in respect of key economic indicators such as economic growth, the rate of inflation or export capacity. At the same time, Germany has managed to hold public debt at bay and keep unemployment down; the country’s dual education system, with its parallel apprenticeship track, has been described as exemplary and held out as a model to other European countries grappling with high youth unemployment. And to cap it all, Germany’s admirers point out, all this has been accomplished in the midst of the global economic crisis that many regard as the greatest disaster of its kind since 1945.

It is only logical that credit for this success tends to be ascribed to whoever happens to head the government, as reflected in the pre-election polls from which the current chancellor, Angela Merkel, emerged more popular than ever before. Even the revelation that citizens of Germany and other European countries have been under US intelligence surveillance (PRISM) did nothing to change that perception. While 70 % of Germans were critical of the head of the federal government for her indecisive attitude and the public were not really convinced by her claim that she had allegedly first learned of the surveillance program from the media, this did not make any dent in her popularity. On the contrary: her Christian Democratic Union (CDU) actually slightly increased its lead on the opposition Social Democrats (SPD).

This factor has further contributed to the feeling many Germans have had over the past few months, that their Chancellor has been around, and will be around, forever. Germany has not experienced anything comparable since the legendary Helmut Kohl era, although his rule lasted for full 16 years, i.e. twice as long as Merkel’s has so far. Unlike Merkel, however, Kohl never enjoyed long-term popularity among German politicians.

The discussion around PRISM and the degree to which the German government and its leader might have been involved, is both telling and ironic. The same applies to the Chancellor’s actual role in Germany’s unusually good economic situation today. Her political style has been described as indecisive, insufficiently emphatic and lacking in clear ideological outlines; in other words, she has proved impossible to pigeon-hole in terms of being on the Right or on the Left. To a large extent, Angela Merkel’s actions have certainly reflected the skepticism with which a large part of German public views free market mechanisms and capitalism as such, an attitude that has always been entrenched in German society, affecting virtually all key political movements—including the self-proclaimed right-wing ones. Suffice it to recall the resistance Merkel met a few years ago when she proposed to overhaul the tax system and introduce a flat tax-rate.

The response to the German Chancellor’s performance has been quite mixed. Writing in the New York Times in the summer of 2012, US historian Steven Ozment suggested that Angela Merkel’s actions reflect her Protestant background and “her politics draws unmistakably from an austere and self-sacrificing, yet charitable and fair, Protestantism.” Merkel herself has for years used a metaphor, comparing her political style to that of a Swabian housewife (“Schwäbische Hausfrau“). The Swabians of southern Germany are famous for being resourceful, frugal rather than spendthrift, and for making sure they put a little money aside at the end of each month for a rainy day.

On the other hand, Josef Joffe, publisher of the Germany weekly Die Zeit, referred to Angela Merkel in an interview as the first real, i.e. quintessential post-modern politician, one who constantly adjusts her palette of political themes and solutions to public demand. In Joffe’s view we live in times when people want politics to leave them alone and not push them into anything, something he believes reflects the modern Weltanschauung. That explains why Merkel, unlike her predecessor Gerhard Schröder and his Agenda 2010, has not come up with any groundbreaking reform ideas of whose benefits she would have to convince her fellow citizens. However, Joffe believes that at the same time postmodern politics has to continually rearrange and restock what its imaginary shopping trolley has to offer the electorate.

Former British labor minister for European Affairs Denis MacShane has given a substantive assessment of the practical impact of Chancellor Merkel’s economic and reform policies. In late July, in a commentary for the German daily Die Welt, he summed up reform policy a la Merkel as “Merkelnomics.“ He didn’t go as far as to categorically condemn her policies or dismiss them as completely erroneous—in fact, he did admit that Merkel was right to strive for a reduction of public debt. Nevertheless, he reproached the German Chancellor for a policy that was too rigid and short on ideas, claiming that her main instrument, i.e. public debt reduction, was to blame for the sluggish growth within the EU and hampered further economic development.

Objectively speaking, one has to admit that in pursuit of their political goals no chancellor in Germany’s postwar history has acted differently. Not even Gerhard Schröder, who may have gone further than anyone else on the path of reform.

In fact, a look back at the Social Democrat Schröder suggests interesting parallels with Merkel. The seven years Schröder spent at the helm of the German government, can be roughly divided into three phases. Phase one, immediately after he took office, was marked by an almost headlong rush to push through, in the shortest possible time, the Red-Green coalition government’s key political projects, including, for example, a new law on state citizenship, or the decision to phase out all German nuclear power plants. The second phase, by contrast, was characterized by the so-called “steady hand politics“ (Politik der ruhigen Hand): its main tenet was avoiding a rash response to short-term fluctuations in the country’s economic development. In spite of this, or maybe precisely because of it, Schröder was eventually able to embark on his third, reformist phase and push through Agenda 2010, a comprehensive reform of the welfare state. On the one hand, this indirectly cost him the office of federal chancellor and his Social Democratic party has yet to recover from the shock caused by the defection of hundreds of members to the post-communist Left. On the other hand, these days no one—including Christian Democrats—would doubt that Germany has benefited from Schröder’s policies.

Some analysts predict that something similar—something that might be called a period of austerity—lies ahead for Germany in the near future even though Chancellor Merkel managed to clear her desk of all „unfinished business“ well before the September election: the 2014 budget, drafted by her Finance Minister Wolfgang Schäuble, envisages a balance between income and expenditure, which meets the formal criteria of a balanced budget. The euro crisis, or the question of rescuing the euro—originally expected to dominate the September election—is now hardly a topic of discussion in Germany. Merkel actually declared the euro saved as early as last December, at the last Christian Democrat convention.

However, this may be only the calm before the storm. In fact, there is a danger that Germany’s old commitments will come home to roost in the foreseeable future. First and foremost, these include the cost of bailing out several German banks that got into trouble through their involvement in risky financial operations with non-transparent financial derivatives. The estimated cost, running to 23 billion euros, has not yet been officially reflected in Germany’s books. The country will have to write off further billions linked to the earlier bailout of Greece. However, the greatest disaster would be if the German economy ceased to grow, as short-term economic forecasts predict. If the economic situation in EU member countries does not improve, German companies will lose out on the export market. At the same time, should the other European countries embark on a slow road to economic recovery, financial market investors will be less willing to lend money to the German government and to buy German bonds, on which they could expect to pay very low or even zero interest rates until recently.

As mentioned earlier, the German Chancellor’s policies lack clear ideological outlines. However, this is not the result of her inability to articulate binding political doctrines but rather an obvious reflection of her determination to position herself firmly in the political middle ground (which can be identified with the social middle ground) and not allow any rival anywhere near it. Among other things, this tactic provides great flexibility in articulating a political agenda. One might go so far as to say that there hasn’t been a big issue that Merkel has not recently “pinched“ from a rival party. It began years ago with family policy: having championed the traditional family model for decades her party suddenly opened itself to alternative forms of cohabitation and also lent its support to the enlargement of the network of kindergartens and nursery schools, whose advocates had previously been on the Left. Following the Fukushima nuclear accident Merkel changed her position on nuclear energy overnight and decided that Germany would phase out all its reactors, thus taking the wind out of the Greens’ sails. This seems to be going down rather well with the German public. According to internal polling carried out by the Christian Democrats and published in the German press, as many as 30 % of Social Democrat voters and up to 10 % of supporters of the Greens can imagine voting for CDU. This is also why the election program of the largest ruling party now includes the promise to introduce a minimum wage and regulate rents. A further side effect of these kinds of promises has been an indirect boost to Germany’s Free Democrats (FDP). In recent years, their party has quite regularly hovered just below the five per cent mark it needs to cross to be represented in the federal parliament. There is some political logic to this: the more the CDU expands into the space left of the centre, the more room it clears for the Liberals. In addition, Angela Merkel made it quite clear before the election that she was interested in continuing her government cooperation with the FDP, forcefully rejecting any speculation of a potential political alliance with the Greens.

On the other hand, by shifting to the left the Christian Democrats have opened up some space for a potential coalition with the Social Democrats—in case their favored alliance with the Liberals lacks the requisite majority or if the FDP fails to make it into parliament. In the past, the Christian Democrats have found themselves in this situation in a number of regional parliaments, having gained a formal victory in the respective Land elections but, since their preferred government ally didn’t gain a seat in the parliament while Social Democrats and the Greens held the majority of seats, they have often ended up in opposition. Trying to form a grand coalition with the SPD has thus often been their only option to participate in government.

Incidentally, the two largest parties in the country—the Christian Democrats and the Social Democrats—might also end up dependent on each other even if they should not create a formal coalition government since—in line with an unwritten rule of German political life— after a while, two different majorities tend to emerge in the two chambers of parliament. That means that the party that wins the majority in the Bundestag (Federal Diet) eventually finds itself facing a different majority in the Bundesrat (Federal Council). And since one chamber of the parliament cannot outvote the other, the two largest parties in the country are forced to reach an agreement. Sometimes this entails only a compromise in the form of an agreement on the lowest common denominator. Which is rather in keeping with the spirit of a Swabian housewife.