Merkel may be forced to resign as German Chancellor after likely election

GERMANY is entering a period of deep political and economic uncertainty as there is no guarantee that Angela Merkel will remain Chancellor until the end of her term in 2021.

The 16 per cent decline in the DAX, the German blue-chip stock index, since the early 2018 peak reflects these worries. Mrs Merkel had been expected to resign as chair of the Christian Democratic Union (CDU) for several months. Her shaky government coalition of the centre-right CDU and sister party Christian Social Union (CSU) with the centre-left Social Democrats, suffered severe declines in support in two key Bavarian and Hesse regional elections recently. The big question now is whether German politics will swing either to the right or left, as both the extreme right Alternative for Germany (AfD) and anti-establishment Green Party gained large numbers of votes from the centre parties. To be sure, there could well be a general election next year, which could force Mrs Merkel to resign as Chancellor.

Poor DAX index performance illustrates German political & economic uncertaintySupporters of Mrs Merkel – a physicist who became CDU leader in 2000 and Germany’s first female Chancellor in 2005 – want their Mutti (mother) to remain as Chancellor for three more years as they want stability. Germany and the rest of the European Union need to negotiate the best possible Brexit deal as a crash-out shock by the United Kingdom could cause a severe financial and economic slide across the continent. So far, there are signs there will be an accord, but other problems include the rise in extreme right and left populism in Italy, France, Netherlands, Greece, Austria and Hungary.

Merkel’s idealistic move to encourage migrants helped bring about her political demise

Ironically, Mrs Merkel accentuated a migrant problem, especially for Italy and Greece. In 2015, she announced that Germany would welcome one million migrants from Syria and other Middle Eastern and North African nations. Her intentions were good – the daughter of a Lutheran pastor, she grew up in Communist East Germany in the 1950s through 1970s, a time when refugees tried to escape that tyranny. The result, however, was a flood of migrants into Mediterranean nations, and the inflows into Germany itself helped the AfD gain support. Her idealism also accentuated the migration fears in Britain that ultimately caused many working-class people to vote for Brexit.

Eurozone debt and zombie banks could haunt the next German Chancellor

There is also pressure on the Eurozone as Italy and Greece are encumbered by massive public and private sector debt. Zombie bank dangers in those nations, and Germany herself have not vanished. The European Central Bank has managed to camouflage these problems by pumping money into the banks via quantitative easing. This policy, which has brought about negative interest rates in Germany, has widened income inequality and discontent throughout Europe.

Adding to the uncertainty, Germany, the strongest economy within Europe, is only growing at 2 per cent per annum while inflation has risen to 2.5 per cent. Its motor industry has covered up a pollution scandal relating to diesel autos. Besides expected large fines, Volkswagen and other companies are already facing intense export competition.

The political demise of a powerful leader for twelve years leaves a vacuum in the EU. Emmanuel Macron has the ambition to succeed Mrs Merkel, but he is deeply unpopular in France. All these problems have surfaced during a period of recovery from the financial crash. The question is what could happen in the event of a European economic slowdown next year?

© Copyright Neil Behrmann

This editorial was first published in The Business Times, Singapore. 
Neil Behrmann is London correspondent of The Business Times. Jack of Diamonds his thriller on global diamond mining and smuggling, has recently been published. It is the sequel to the thriller, Trader Jack, The Story of Jack Miner.

See reviews of both books at  https://www.amazon.co.uk/Neil-Behrmann/e/B005HA9E3M

 

 

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