Chancellor Angela Merkel propelled Europe through crises, and Germany has grown during her tenure. But it has touted the changes needed to ensure success, analysts say.
During her 16 years as Chancellor of Germany, Angela Merkel has become an international embodiment of calm, reason and democratic values for the way she has handled crises, including a near financial meltdown of the eurozone, more than a million The arrival of more migrants and a pandemic are involved.
Today Germany is an economic superpower, the engine of Europe, enjoying prosperity and full employment despite the pandemic. But can it last?
That is the question as Ms Merkel prepares to leave the political stage after the national elections on 26 September. There are signs that Germany is economically weak, losing competition and unprepared for a future of rivalry between technology and the United States. China.
Economists say that during his tenure, Germany neglected to build world-class digital infrastructure, hindered its hasty exit from nuclear power, and threatened China as a market for its auto and other exports. heavily dependent.
The question of China is particularly complex. Germany’s strong growth during Ms Merkel’s tenure was largely the result of trade with China, which she helped promote. But, increasingly, China is becoming a competitor in areas such as industrial machinery and electric vehicles.
Economists say Germany has not invested enough in education and emerging technologies such as artificial intelligence and electric vehicles. Germans pay some of the highest energy prices in the world as Ms Merkel prompted the closure of nuclear power plants without expanding the country’s network of renewable energy sources enough to cover losses.
“It’s going to come back to haunt Germany in the next 10 years,” said Guntram Wolff, director of Bruegel, a research institute in Brussels.
Ms Merkel has never been under greater pressure to focus on fundamental economic policy as the German economy has boomed during her tenure. Germany has recovered from the pandemic faster than other European countries such as France or Italy.
But the pandemic has also exposed Germany’s economic dependence on China.
In 2005, China accounted for a fraction of German exports. Last year it overtook the United States as Germany’s largest trading partner. China is by far the biggest market for automakers Volkswagen, Mercedes-Benz and BMW. German companies have also succeeded by equipping Chinese factories with machine tools and other industrial goods, which has made China an export powerhouse.
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Ms Merkel abandoned her initial emphasis on human rights in her relationship with the Chinese government and instead always encouraged deeper economic ties. He hosted Chinese leaders in Berlin and traveled to Beijing and other cities in China 12 times, often accompanied by a delegation of German business managers. But Germany’s economic entanglement with China has made it more vulnerable to pressure from Chinese President Xi Jinping.
Late last year, while Germany took its official turn setting the EU agenda, Ms Merkel and French President Emmanuel Macron pushed through an investment deal with China over objections from the incoming Biden administration, Largely sidelined other European allies.
“German trade with China dwarfs all other member states, and Germany clearly drives policy on China in the EU,” said Theresa Fallon, director of the Center for Russia Europe Asia Studies in Brussels. Germany’s economic dependence on China is “creating a rift in trans-Atlantic relations,” Ms Fallon said.
In recent years, China is using what it has learned from German companies to compete with them. Chinese carmakers, including Nio and BYD, have begun selling electric vehicles in Europe. According to the VDMA, which represents German engineering companies, China has become the No. 2 exporter of industrial machinery after Germany.
Ms Merkel’s supporters say she has helped the German economy dodge some bullets. His sharp political stance proved valuable during the Eurozone debt crisis that began in 2010 and nearly destroyed the currency Germany shared with 18 other countries. Ms Merkel has arguably kept radicals in her Christian Democratic Union in check as the European Central Bank printed money to help stricken countries such as Greece, Italy and Spain.
But his longtime finance minister, Wolfgang Schaubl, was also a key enforcer of policies that protected German banks while imposing harsh austerity on southern Europe. At the time, Germany refused to back the idea of a collective European debt – a position Ms Merkel abandoned last year when faced with fallout from a pandemic threatening European unity.
Ms. Merkel also had some luck. The former communist states of East Germany largely took hold during his tenure. And Ms Merkel benefited from reforms undertaken by her predecessor, Gerhard Schröder, that made it easier for firms to hire and fired, and put pressure on unemployed people to take low-paying jobs.
Mr. Schroeder’s economic recovery led to a sharp drop in unemployment, from more than 11 percent to Ms. Merkel’s from less than 4 percent. But the changes were unpopular because they weakened the rules protecting the Germans from layoffs. He paved the way for Mr Schroder’s defeat by Ms Merkel in 2005.
The lesson for German politicians was that it was better not to tamper with the privileges of Germans, and for the most part Ms Merkel did not. Many of the jobs created were low-paying and provided limited opportunities for upward mobility. It has also resulted in increased social inequality, with rapidly aging populations increasing the risk of poverty.
“Over the past 15 to 16 years we have seen a clear increase in the number of people living below the poverty line and living at risk,” said Marcel Fratzscher, an economist at the DIW Research Institute in Berlin. “Although the years of 2010 were very successful financially, not everyone has benefited.”
Ms Merkel’s failure to invest more in infrastructure, research and education, despite her background as a doctor of physics, also reflects the German aversion to public debt. Mr. Schauble, as finance minister, enforced fiscal discipline that prioritized budget surplus over investment. The German parliament, controlled by Ms Merkel’s party, even instituted a so-called debt break, a balanced budget in law.
Frugal policies were popular among Germans that combined deficit spending with runaway inflation. But he also left Germany behind other countries.
Germany since 2016. has slipped from 15th to 18th place in the ranking of Digital Competitiveness by Institute of Management and Development in Lausanne, Switzerland, which was partly attributed to lower training and education as well as declining government regulations. According to the Labor Ministry, 40 to 50 percent of all workers in Germany will need to be retrained in digital skills to keep working within the next decade. Broadband internet is lacking in most German schools and teachers are reluctant to use digital teaching tools – a situation that became increasingly apparent during the coronavirus lockdown.
“Technology is strategic. It is an important tool in our systemic rivalry with China,” Omid Nuripore, a lawmaker who speaks for the Green Party on foreign affairs, said this month during an online discussion hosted by the Berenberg Bank. We didn’t create enough awareness about it in the past.”
The need to modernize Germany has become more urgent as climate change becomes more tangible, and as the shift to electric vehicles threatens the hegemony of German luxury automakers. Tesla has already taken significant market share from BMW, Mercedes-Benz and Audi, and is building a factory near Berlin to challenge them on its home turf. Until last year, the financial incentives the German government offered to buyers of electric cars were far less than the tax credits available in the United States.
Daimler chief executive Ola Kelenius told reporters, “It is very important for Germany as an industrialized nation and also for Europe as a place for innovation, between an ambitious climate policy and a very strong economic policy.” There’s a symbiosis.” IAA Mobility Trade Fair in Munich.
Auto executives do not criticize Ms Merkel, who has been a strong advocate for her interests in Berlin and abroad. But he clearly blames his government’s sluggish response to the transition to electric vehicles. While Germany has more charging stations per capita than the United States, there are not enough to support the growing demand for electric vehicles.