An­gela Merkel’s legacy may not be all she hoped for – but her suc­ces­sor won’t have it much eas­ier

Financial Mirror (Cyprus) - - MARKETS - By Ryan Bridges

Fri­day marked An­gela Merkel’s 4,750th day as Ger­man chan­cel­lor – that’s 13 years. It’s been a re­mark­able run for Ger­many’s first fe­male chan­cel­lor, one who led Europe’s great­est power through the global fi­nan­cial cri­sis, the Euro­pean sov­er­eign debt cri­sis and the refugee cri­sis. For nearly half that time, Ger­man pun­dits have been pre­dict­ing “Merkeldäm­merung,” Merkel’s twi­light. Fi­nally, it has ar­rived. In late Oc­to­ber, amid his­tor­i­cally low ap­proval rat­ings for her Chris­tian Demo­cratic Union party, Merkel an­nounced that she would not seek the po­si­tion of party chief again. The CDU will vote on her re­place­ment in just over two weeks. The win­ner of that race will be the favourite to re­place Merkel as chan­cel­lor in 2021 – if her gov­ern­ment makes it that far.

The Chan­cel­lor’s Legacy

Merkel will hardly be re­mem­bered for lead­ing Ger­many out of its dif­fi­cult post-re­uni­fi­ca­tion years and into a time of great pros­per­ity, though she did. (In Au­gust 2018 un­em­ploy­ment in the coun­try was at 5.2%, the low­est level since re­uni­fi­ca­tion, and down from 11.5% in Novem­ber 2005.) In­stead, she will for­ever be known as the chan­cel­lor who of­fered up Ger­man sav­ings to de­fend the eu­ro­zone. That series of de­ci­sions cul­mi­nated in the move to bail out Greece in 2015 rather than al­low a Grexit and in the process gave rise to the far-right Al­ter­na­tive for Ger­many party, which has sapped the CDU’s sup­port.

Merkel also will be re­mem­bered for re­fus­ing to close Ger­many’s bor­ders dur­ing the 2015 Syr­ian refugee cri­sis (a call that was short-lived and mis­char­ac­terised as “open­ing the bor­ders” – Europe’s in­ter­nal bor­ders were al­ready open), al­low­ing more than 1 mil­lion peo­ple to en­ter the coun­try in a span of two years.

Be­fore those crit­i­cal de­ci­sions, the CDU had for a cou­ple of years con­sis­tently polled above 40%; to­day its ap­proval is in the mid-to-high 20s, an all-time low.

It would have been ex­traor­di­nar­ily dif­fi­cult for any Ger­man leader to have acted oth­er­wise. Sav­ing Greece – at what will prob­a­bly prove to be a pro­hib­i­tive cost for the Greeks – may have pre­vented the col­lapse of the eu­ro­zone. And with­out the eu­ro­zone’s ease of trade, the Ger­man econ­omy would suf­fo­cate.

When Ger­many opted to tem­po­rar­ily waive EU asy­lum pro­ce­dures for Syr­ian ap­pli­cants, it opened a re­lief valve for the over­whelmed Hun­gar­ian gov­ern­ment. Once asy­lum­seek­ers in Hun­gary be­gan march­ing to­ward the Aus­trian border, there was no re­al­is­tic way to stop them short of border clo­sures, which would have rip­pled through­out the Schen­gen zone and dis­rupted vi­tal trade. These de­ci­sions took courage, but they were the least-bad op­tions avail­able. They also proved to be po­lit­i­cal sui­cide.

The Suc­ces­sor’s Chal­lenge

Dif­fi­cult de­ci­sions abound for the next chan­cel­lor. Ger­many’s ex­port-ori­ented growth model has taken the econ­omy to new heights, but it is now dan­ger­ously un­bal­anced at a time when global con­sump­tion is slow­ing. If the Ger­man econ­omy can’t adapt to the 21st cen­tury, it will

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