[Person人] From Europe's Sick Man to Economic Powerhouse... 16 Years Led by 'Mutti Leadership'

Angela Merkel, Chancellor of Germany

[Asia Economy Reporter Yujin Cho] 'From the sick man of Europe to the largest economic power.'

Chancellor Angela Merkel transformed Germany, a 'sick nation' plunged into long-term stagnation due to the aftermath of reunification, into the European Union's (EU) largest economic power. Although she stepped down from her 16-year tenure as chancellor following the general election held at the end of last month, Germans still miss Merkel. With significant difficulties expected in forming the next coalition government after the election, there are even forecasts that Merkel will continue to exert considerable influence in the 'post-Merkel' era. The Wall Street Journal (WSJ) stated on the 4th (local time), "Merkel led Germany to unprecedented prosperity, but she was a compassionate and courageous leader, neither belligerent nor authoritarian," adding, "It will be hard to see a leader like her again in Germany." Amid the selfishness of great powers, she became a symbol of leadership in the Western camp.

◇ Germany full of weaknesses ... accounting for one-quarter of the EU's total GDP = Merkel took office in 2005 as Germany's first female chancellor in history, stepping into the spotlight and leading four general elections to victory. During Merkel's 16 years in power, there were crises. Each time challenges arose?such as the 2008 global financial crisis, the 2011 European debt crisis, the 2015 Syrian refugee crisis, and last year's COVID-19 pandemic?she demonstrated 'Mutti (Mom) leadership' to guide Germany.

According to Eurostat, the EU's statistical office, in 2019, the year just before the COVID-19 pandemic, Germany accounted for one-quarter (24.7%) of the EU's total gross domestic product (GDP). This was an achievement reached in Merkel's 14th year in office. Although Merkel grew Germany into the EU's number one economic power, her start was not smooth. In 2005, when she took office, Germany was struggling with high unemployment and severe fiscal deficits due to the aftermath of reunification. The economy was full of weaknesses, and the fiscal situation worsened to the extent that it violated the EU's Stability and Growth Pact, which requires maintaining annual fiscal deficits within 3% of GDP since 2002.

Merkel inherited the basic framework of former Chancellor Gerhard Schr?der's 'Agenda 2010' reform policies and implemented reforms in taxation, labor, and economic sectors. Through market-friendly policies such as labor market flexibility and corporate tax rate reductions, she created jobs for companies and carried out tax reforms that collected wealth taxes, leading to debt reduction and economic recovery. As a result, during Merkel's tenure, the unemployment rate dropped from 11.1% in 2005 (according to World Bank data) to 3.8% last year. Currently, Germany is considered the country with the second-lowest unemployment rate among EU member states, following the Netherlands.

The card Merkel played to overcome the mass unemployment crisis was 'Kurzarbeit (short-time work).' Kurzarbeit is a program that protects employment by reducing working hours instead of layoffs during crises, with the government compensating part of the wage reduction caused by shorter working hours. Goldman Sachs analysts evaluated, "The Merkel government maintained sound public finances and curbed debt increases," and "During the crises in 2008 and 2020, it successfully defended the labor market with the 'Kurzarbeit' program."

Germany also used short-time work to overcome employment crises during the 2008 global financial crisis. At that time, major companies such as Volkswagen, Daimler, BMW?the three German automakers?and Lufthansa Airlines participated in short-time work. As a result, Germany's GDP, which was 2.3 trillion euros (according to the German Federal Statistical Office) in Merkel's first year in office, soared to 3.3 trillion euros last year.

Germany showed a different aspect from other EU powers such as the UK and France in its refugee policy. Chancellor Merkel pursued a tolerant immigration policy alone amid anti-immigrant sentiments in EU countries. Especially during 2014?2015, when hundreds of thousands of refugees flooded into the EU due to the Syrian civil war, Merkel opened the borders and accepted over one million refugees, contrary to other countries that closed borders and adopted anti-immigration stances. However, this tolerant refugee policy led to backlash and defection among conservative supporters, causing a decline in approval ratings in the 2017 general election.

◇ Who will lead the 'post-Merkel' era? = In Germany, negotiations to form the next coalition government have begun in earnest. On the 5th (local time), the Green Party and the Free Democratic Party (FDP), holding the casting vote, completed the first stage of preliminary talks and plan to decide within this week which party?either the Social Democratic Party or the Christian Democratic Union/Christian Social Union alliance?they will negotiate coalition talks with first. Currently, Olaf Scholz, the Social Democratic Party's chancellor candidate who rose to become the largest party for the first time in 16 years in the 20th Bundestag election, appears likely to become the leader of the 'post-Merkel' era. Although historically the chancellor is elected from the largest party, this is not absolute.

Traditionally, the Social Democratic Party and the Christian Democratic Union alternate as first and second, forming coalitions with two parties. The coalition formation scenarios are currently condensed into three: the traffic light coalition, the Jamaica coalition, and the grand coalition. Both the Social Democratic Party and Merkel's Christian Democratic Union/Christian Social Union alliance intend to lead the coalition. Among the three scenarios, the most likely are the traffic light coalition led by the Social Democratic Party with the FDP and the Greens participating, and the Jamaica coalition led by the Christian Democratic Union/Christian Social Union with the FDP and the Greens participating. Whichever of the two major parties leads the coalition, they must bring in the FDP and the Greens. If the Christian Democratic Union/Christian Social Union is excluded in forming a traffic light coalition, significant changes in the direction of the German government are expected.

This content was produced with the assistance of AI translation services.