Originally published in the October issue of Le Monde Diplomatique
Angela Merkel and her Christian Democrat party (CDU/CSU) have won a resounding victory in Germany’s general election. Merkel has broken what had become an established rule of European politics since the beginning of the crisis: incumbents don’t get re-elected.
Merkel had seen this at first hand as close working relationships with other European politicians were felled by electoral fortunes. The peculiar alliance of France and Germany (“Merkozy” to the European press) was undone as Nicolas Sarkozy lost out in the 2012 French presidential election to his Socialist challenger, François Hollande. Mario Monti, another favourite partner of Merkel, was routed in Italy’s election earlier this year by the comedian-cum-blogger Beppe Grillo and his Five Star movement. Incumbents have lost out across southern Europe — Spain, Greece, Portugal — as voters hope that a change in government might mean a change in fortunes. There has been no decisive shift left or right, just a broad and sweeping dissatisfaction with existing governments. Apart from Germany.
Merkel’s re-election doesn’t mean that nothing has changed in Germany or that it has been blissfully untouched by the Eurozone crisis. Looking at the substance rather than at the party labels, we see shifts. The more dogmatically free-market FDP, Merkel’s coalition partner in the outgoing government, failed to secure any parliamentary representation at all. The Left Party, Die Linke, a persona non grata for mainstream German politicians because of its roots in East German Stalinism and its opposition to NATO, now has more parliamentary seats than the German Greens. If the Social Democrats (SDP) enter into a coalition with Merkel’s party, then Die Linke will lead the opposition within the Bundestag.
The policies of Merkel herself have steadily drifted leftwards as she has taken on ideas first floated by the SDP. From military conscription to a minimum wage and rent controls, Merkel has adopted policies that first came from the left. This had the effect of emptying much of the campaign of any traditional ideological conflict. German voters have not been divided by the politics of left and right, given the vastly similar programmes adopted by the main parties. Merkel has even given up on nuclear power, in a move that pulled out from under the feet of the Green Party their most distinctive policy position. Instead, the campaign was fought around the language of risk and of personality. Germans preferred Merkel’s low-key, homely aspect to Steinbrück’s debonair image and, seeking reassurance in the widespread depoliticisation, voted for Merkel’s motherly, risk-averse approach.
Political stability in Germany reflects its unique position in Europe as the country that has survived the crisis. Not unscathed, as the leftwards shift suggests, but markedly better off than any other country. Having reformed itself in the early 2000s, German industry rode an export-led boom that continues today. As trading partners in Europe — from Eastern Europe through to southern Mediterranean economies — crashed and burned from 2009 onwards, Germany compensated by expanding sales in non-European export markets. What it lost by way of demand in Europe it has gained in emerging markets, especially in Asia. Germany’s current account surplus, at $246bn over the last year (6.6% of GDP), is greater than China’s. Along with a more flexible labour market that is keeping unemployment low (but part-time employment high), we have the material foundation for Merkel’s victory. But though this foundation is solid, Germany is not booming. Since the early 2000s, German wage growth has been very limited. Moreover, few Germans own their own homes, meaning that they have not experienced the same wealth effects of rising house prices felt by a chunk of the British middle- and upper-middle class, the Dutch, Italians and Spaniards. They have been saved from the effects of collapsing property prices but have not known the heady days of year-on-year price rises. Merkel’s cautious optimism reflects the attitude of a large part of the German working and middle class who feel that their relative prosperity is precarious and needs to be closely guarded.
The meaning of Merkel’s victory for the rest of Europe is mixed. It is possible that Merkel will soften her stance to some extent now the election is over, though we should not expect any sudden U-turns on something like Eurobonds. A slow recalibration of the Eurozone economy is more likely, as crisis-hit countries like Spain and Ireland regain some competitiveness via internal adjustments to wages and prices. Where Merkel may compromise is on measures to boost domestic demand. If Germans were to consume a little more rather than save so much, that would help pull other Eurozone economies out of their deep depression. Though something like this may happen, any recalibration will still occur within the context of a Eurozone marked by massive disparities in wealth and spatially organised around a clear logic of centre and periphery.