Angela’s Twilight

Is it time to buy tickets for the new opera Die Merkeldammerüng? The iron rule in politics is that no good deed goes unpunished and the growing European and global rejection of Merkelomics must be wounding to a Chancellor who has served her nation as well as any of her CDU predecessors. Like Konrad Adenauer or Helmut Kohl she is likely to win a third federal election in September but unlke them, or Europe’s other great woman leader, Margaret Thatcher, Mrs Merkel will have the good sense to leave the Kanzleramt at a time of her choosing rather than being thrown out by her own party or the electorate.

And with her will go the narrow vision of orthodox economics that had sustained Europe on its path of no growth since the banking crash of 2008. It has been fashionable to blame the crash on greedy American bankers and deregulated City traders. Both charges are true but many German, Swiss, French and all EU banks wallowed in the same dirty water and enjoyed the casino capitalism profits that derivative trades, hedge funds and other value-subtracting financial instruments provided.

Mrs Merkel cannot be blamed for corrupt public finances in some southern European countries. Nor is she responsible for the Irish or Spanish housing bubble or the refusal of Greek governments of left or right to collect taxes from their voter clients. Germany does not preside over a chain on tax evasions islands unsupervised by the British government. It was not Mrs Merkel’s fault Germany has neighbours like Switzerland, Luxembourg and Lichtenstein which could have given tax planning advice to Al Capone.

Mrs Merkel was lucky in that her predecessor, Gerhard Schröder, did all the heavy lifting to clean up the German economy and make it competitive again. The smart Luxembourg prime minister, Jean-Claude Juncker, said that ‘Every political leader in Europe knows what needs to be done but none of them know how to get re-elected after they have done it.’  Mr Schroeder proved the point. He held down workers’ wages for half a decade and created low-pay jobs. German industrial capitalism was saved but Mr Schroeder was not as his voting base kicked him out.

Mrs Merkel has done no harm to the German economy. But she has done no good to the wider European economy. After five years of Merkelnomics half of the EU is in recession and the half that is not shows little or no growth.  Indeed her do-little management style is edging Germany toward zero growth. As a result she now faces the same populist anti-European politics as seen from the UK’s Nigel Farage, the Netherlands’ Geert Wilders, Italy’s Beppe Grillo, the True Finns, or Marine Le Pen and Jean-Luc Mélanchon in France.

Merkelomics needs to give way to smarter economic management. The United States and Japan are showing some ways forward. America’s new energy revolution based on shale gas should inspire Europe.  After twenty years of fantasy that today’s absent sunshine would do away with coal, gas or nuclear needs Europe needs to understand that the high costs of energy and the protectionist fragmented energy market are now a significant brake on growth.

Merkeleconomic has too much moralizing in it to be easily exported. Of Other EU member states can learn from Germany that labour market reforms and keeping spending in line with income are the indispensable twins of any new economic paradigm. Despite foolish attacks by some French socialists against Mrs Merkel, it seems that President Hollande is Merkelizing himself. He has announced major cuts in public spending, an increase in retirement age, a reduction in benefits and tax-breaks for private firms.

The London stock market is booming and Apple sits on $250 billion of cash. These mountains of capital currently hoarded by the über-rich need to become free-flowing rivers of capital that can create a new middle class of entrepeneurs and fair-paid workers.

That requires new economic thinking, the kind of imagined future of Erhard’s Sozialmarkwirtschaft. However imagination, vision and political risk are not words associated with Mrs Merkel. It is wrong to blame her for Europe’s problem but it is right to ask if more Merkelnomics is the answer. She has done all she can and is now an obstacle to progress. All political stars fade, and Merkel’s twilight has begun

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