Two months away from federal elections and facing a destabilized planet, it is imperative for the Chancellor to adapt to the new world.
Less than two months away from the federal elections on 24th September, Angela Merkel is more than ever the strong favorite – for election to a fourth term of office as Chancellor. In contrast to the risks involved in the Brexit referendum and the American and French presidential elections, Germany’s particular culture of stability seems unshakeable. The only thing that is uncertain is the make-up of the next coalition. The SPD is desperately seeking to position itself and its grassroots – from a sociological point of view – which were crushed by Agenda 2010. The Greens and the FDP are competing for a place beside the CDU in the future government. Die Linke on the far right and the AfD on the far left are engaged in a struggle to be the representatives of radical opposition.
To all appearances, the more the world changes, the less things change in Germany. And yet, all the principles at the root of German stability and behind the success of Angela Merkel’s policy will have to adapt to the new global and European situation; she will not only have to administer, but also to anticipate and innovate.
From a macroeconomic point of view, Germany is going full steam ahead. Growth is at 2% in 2017; there is full employment with an unemployment rate down to 4.2% of the working population; the trade surplus was 252 billion euros in 2016; public accounts show a surplus and the national debt has been brought down to 69% of GDP. However, the social market economy and the growth model through exports are reaching their limits.
The crushing German surpluses are being increasingly contested not only within the euro zone but also by the USA, which is threatening the automobile sector with protectionist measures and is imposing sanctions against the Nord Stream 2 project which is vital for Germany’s gas supplies. Furthermore, there have been more and more disasters in company governance, notably in the automobile sector – a direct provider of over 800,000 jobs – with Dieselgate and suspicions of cartels, which could involve 50 billion euros in fines; and in the financial sector with the difficulties of Deutsche Bank and regional banks, which are expected to be restructured.
German society, which served as an example because of its moderation and its ability to make compromises, has become divided and polarized. The financial crisis and then the effect on the euro have engendered a considerable rise in debt and caused people to fear that the cost of all this will be borne by the German taxpayer. Monetary expansion strategy and the negative rates applied by the Central European Bank have sapped the income of retired people. The refugee crisis and the increase in terrorist attacks have propagated fear and fuelled xenophobia. The immediate effect of this malaise is the resurgence of the far right with the AfD and the rise of violence, as witnessed by the clashes that took place during the G20 meeting in Hamburg.
Finally, both Europe and the world have been profoundly destabilized, including destabilization by those whom Angela Merkel regarded as her most powerful and most trusted allies: the USA and the UK. Europe is facing a strong resurgence of security risks from Islamic terrorism, from pressure from the démocratures [a combination of democracy and dictatorship] of Russia – since Vladimir Putin has destroyed the European security system, annexed the Crimea and invaded Ukraine – and of Turkey – with Recep Tayyip Erdogan seeking to set the 3-million strong Turkish community in Germany against Berlin –, and from the rocketing waves of migrants.
Brexit has unleashed populism and threatened to lead the Union into a downward spiral of disintegration, depriving it of a liberal mainstay and a third of its military potential. Worse than this, Donald Trump’s chaotic leadership is making the world more dangerous and unpredictable, undermining world order by contesting free trade agreements and multilateral alliances and institutions. In doing this, the USA is attacking the values and institutions that are the very foundations of the RFA and the reunification of Germany – which made Angela Merkel what she is.
Germany therefore has to reinvent itself. Angela Merkel’s resilience and her ability to establish herself as a fixed point may now become a handicap by preventing her from taking account of radical changes to her environment as well as the beginnings of a European momentum that it would be tragic to lose.
During Angela Merkel’s fourth term of office, she will have to take up five challenges. To integrate migrants and reform the right to asylum and residence in the European Union. To invest in infrastructures, education and innovation so as to speed up the digital transformation of German industry. To restore security by pursuing rearmament, which should bring the defense budget from 37 up to 60 billion euros in 2025, i.e. 2% of GDP. To strengthen the euro zone by coordinating economic policies and bringing new life to the European Union by endowing it with the necessary powers in security matters, especially in border control on the continent.
Angela Merkel is all-powerful within Germany but highly restricted in external policy. She hates the world that has been born of the crises of the early 21st century, but she has no other choice than to adapt to them. Now that she can no longer count on the USA, the European Union is the only strategic weapon she has, and France is her obligatory partner. Ultimately, she depends on Emmanuel Macron’s ability to reform the French economic and social model, a precondition for restarting the Franco-German partnership and, consequently, instituting Europe’s recovery.
(Column published in Le Point, 3rd August 2017)