Angela Merkel’s economic legacy in the spotlight as her successor faces challenges


The end of an era is approaching in Germany. Angela Merkel’s 16-year empire as chancellor is almost over. However, while Merkel has undeniably been a dominant figure in global politics, there is a great debate about her economic legacy. The German Iron Mum First of all, the positives. As Goldman Sachs’ business team points out, Germany has become considerably richer under Merkel, with its GDP growing more than its neighbors Italy and France and by roughly the same amount as the UK.

The team notes that although Germany has contracted more sharply during the global financial crisis than the rest of the euro area, it has grown by an average of 1.1% per year since Merkel took office. in 2005, about twice as much as the rest of the currency area.

However, take demographic shifts into account – primarily the fact that Germany’s population has grown less rapidly than that of comparable economies – and the picture looks even better, with GDP per capita growing much more over the period than the Great -Brittany, the United States or the rest of the euro zone.

He points out that unemployment fell to a historically low level during his tenure, without the economy overheating and inflation taking off, although much of the credit goes to Gerhard Schroder, his predecessor, whose reforms the labor market made it more attractive for millions of Germans to find a job than to stay at home on benefits.

The outgoing Chancellor has often compared herself to the ‘schwaebische hausfrau’, or Swabian housewife, a stereotypical woman from southwestern Germany who cares about her family’s money.

The Goldman team also highlights the benefits of Merkel’s frugal approach to Germany’s public finances.

Ms Merkel summed up her approach when, during the global financial crisis, she was asked about the collapse of Lehman Brothers and replied: “You should have asked a Swabian housewife.

“She would have told us that you cannot live beyond your means in the long term.”

The outgoing chancellor reduced Germany’s budget deficit and ensured that the country’s finances were in solid shape when the global financial crisis and then the COVID-19 pandemic struck, allowing Germany to pass through the twin crisis. She also oversaw minimal disruption of the financial crisis with the so-called ‘Kurzarbeit’ program upon which Rishi Sunak, the British Chancellor, modeled the UK’s leave schedule during the pandemic.

These are all entries in the credit column, but there are also a lot of debits. Ms Merkel’s attempts to install the values ​​of the Swabian housewife in the enlarged euro area tested the idea of ​​a European monetary union almost to destruction; undoubtedly, the single currency survived the crisis – certainly caused by countries like Greece which cook the books for many years – only because of the daring action of Mario Draghi, then president of the Central Bank European.

This action, it should not be forgotten, was taken in the face of furious opposition from the Bundesbank, the German central bank, presumably with the tacit support of Merkel. As Roger Bootle, founder of the consultancy firm Capital Economics, puts it: “German fiscal probity has both constrained the performance of the German economy and exacerbated imbalances within the euro area.

This fiscal conservatism has also resulted in miserable standards of public infrastructure. During Merkel’s tenure, net public investment in Germany as a proportion of GDP was lower than that of comparable economies, notably the United States, the United Kingdom and France.

The result is that Germany’s once admired motorway network is dilapidated in places as the country lags its peers in its pace of digitization and broadband capacity. The Goldman team sums it up: “Germany has fallen behind in modernizing its economy.

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  • Angela Merkel’s economic legacy in the spotlight as her successor faces challenges
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