Tuesday, November 29, 2005

Germany under "Angie" Merkel - What to Expect

Germany suffered tremendously under past German Chancellor Schröder's inept administration. Schröder's anti-capitalist and anti-Anglo-Saxon foreign policy led not only to a greatly diminished significance of Germany on the international scene but also severely damaged the German economy. Schröder's relationship to the European Commission was also icy.

Schroeder made many enemies, and few allies. German-American relations are at an all time low and German unemployment is at an all time high. Schröder's flawed policies are contributorily responsible for these - closely related - developments. We can think of nothing that is better in Germany due to the Red/Green Schroeder era - quite the contrary, everything is worse. "Goodbye Schröder" is great news.

His replacement is new German Chancellor Angela Merkel, the first female Chancellor in German history, who takes office supported by an emergency "grand coalition" of Germany's two largest political parties, the conservative CDU/CSU and the socialist SPD.

Whereas Schroeder was a man who possessed many of the talents necessary to be elected Chancellor and almost none of the talents required to actually be Chancellor effectively, Merkel is nearly the exact opposite. Schröder was what the Germans call a "Blender" (all show but no go, i.e. someone who "blinds" to the realities), whereas Merkel is definitely more understatement. However, she probably possesses the leadership qualities necessary to exercise her office with great competence, which Schröder did not. That at least is our assessment of her qualifications. But she is not and can not be a German Maggie Thatcher (read Clay Risen at Slate for a superb background article). Her impact will be strong, but different.

Wolfgang Munchau of the Free Republic, November 21, 2005, has perspicaciously analyzed recent developments under the title "Schröder's legacy will haunt Merkel".

We are not as pessimistic as Munchau, who writes that Merkel may not make a big difference. Rather, we see signs of dynamic change in the offing for Germany.

As reported by Dan Bilefsky and Judy Dempsey in the November 24, 2005, International Herald Tribune, Merkel made two initial visits in her first 24 hours as Chancellor, to Paris and to Brussels. Her visit to Paris was made to emphasize the necessity of pragmatic German-French relations in Europe. On her visit to Brussels, her first stop was NATO headquarters, where Merkel assured NATO Secretary General Jaap de Hoop Scheffer that German foreign policy would again be based on a firm transatlantic relationship, a transatlantic relationship nearly destroyed by Schröder.

Merkel then visited the European Parliament to be greeted by hundreds shouting "Angie". Thereafter she went to the offices of Prime Minister Guy Verhofstadt of Belgium and afterwards talked with José Manuel Barroso, President of the European Commission, surely attempting to mend fences. As Munchau writes:

"Domestic [German] politicians such as Mr Schröder have often portrayed the European Commission as an institution infested with Anglo-Saxon libertarian zealots who are out to destroy German industry."

Under Merkel, it is quite clear that German relations to the powerful European Commission will be normalized. The IHT quotes Merkel as reaffirming her position that Europe must focus on economic reform:

"so that in a globalized world we can keep up and be competitive."

Merkel also called on the EU to revive the EU Constitution.

As for French-German relations, Chirac is quoted as saying that "Europe is a bit like a car with a broken part".

The IHT writes on the Franco-German relationship:

"Merkel's advisers said the relationship between Berlin and Paris was no longer serving the interests of European integration and instead was becoming a relic of historical reminiscences and symbols."

In this regard, Karl-Heinz Kamp of the Konrad Adenauer Foundation is quoted as saying that:

"Merkel is not into symbols for the sake of symbols that characterized the Franco-German relationship. She wants it to be based on the issues."

A Chancellor who bases her policy on the issues is going to be successful. That is what successful leadership is all about - because leaders set the direction of movement. If the direction is correct, success will inevitably follow.

Clay Risen at Slate quotes Götz Aly at the online Opinion Journal of the Wall Street Journal:

"If Angela Merkel succeeds … the Federal Republic should see changes more radical than any since 1949."

Germany must change significantly to meet the demands of the modern age and that change can only be initiated at the top.

As Aly writes:

"A state that spends 48% of its budget on social-welfare entitlements and 14% on interest payments on a growing mountain of debt, and can only invest 11% in modernizing infrastructure, has long since lost its ability to act. It is bankrupt. Any company that behaved this way would rightly be liable for fraudulent avoidance of bankruptcy under German law. An economy that requires at least half the hourly wage to be paid over to the government in the form of taxes and entitlements, and on top of that significant consumer and corporate taxes, is no longer competitive."

Now we can put the previous quoted sentence into perspective as Aly writes further:

"If Angela Merkel succeeds in winning office at the September elections and, against great resistance in her own party, in remaining true to herself, the Federal Republic should see changes more radical than any since 1949. As a physicist, she knows that the relationship between cause and effect cannot be simply wished away. Her most formative experiences came during communist East Germany's collapse. She has seen what happens when a country uses up its material basis, when it sinks into social and national stagnation while a regime of lies plays on, like the band on the Titanic. Most influential German politicians spent their youth, student years and early careers in the fat boom years of the old republic on the Rhine. Ms. Merkel likes to tell them, even those in her own [very conservative] party, "You have no idea how socialist you are.""

In the end, the most socialistic position is still "survival for everyone". To achieve that end, Germany will have to change and we think it will change significantly, even though Merkel must function in a coalition government with the normally opposition socialists. The fact that the socialists have entered into this coalition at all clearly evidences their "will for survival". If that same will for survival is applied to the Germany which they lead, then their policies must also change.

That is why we think that significant reforms will now be made under the Merkel administration, coalition government notwithstanding.
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