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Angela Merkel was not a visionary, but she allowed her country to be a giant within Europe

Jean-Pierre Dumas

December 8, 2021


Certainly, Angela-Merkel-is-no-saint, nor a visionary as said by M. Frank, she did not create the German Empire as Bismarck (in 1870 in Versailles), she did not participate to the reunification of Germany (1980) and was not responsible for the creation of the euro (1992) as H. Kohl.


Her legacy is not that she has passed the first minimum wage in Germany (which is good for a country like France, which has a very high minimum wage (SMIC) which is compulsory and source of structural unemployment. Her legacy is not that she promoted marriage equality (which is the result of the strength of public opinion, it is good (for leftists) and bad (for bigots), it is in the wind of change, it is unavoidable.


Why did A. Merkel stand out in her 16-year reign? Because of reasons not seen by the author you mention, M. Frank. A lucid analyst must always look at what is not mentioned by a polemist (“What is important is not what is said but what is not said,” Freud).

She has continued the path mapped by her predecessor, respect of rules with flexibility, she was able to weather crisis with flexibility and strength.


Merkel is, in my view, a conservative, aware of the limit of the power of a leader (chef d’État). In France (I compare both countries because of their geographical and historic links), too often the discourse replace actions. A brilliant speech will not change anything. In France everybody speaks about reforms, but few are implemented. Ms. Merkel deceives because as a good conservative she knows the limit of power, so she does not promise anything she cannot implement. This is the opposite in France, a country with a legacy of a powerful king (“le pouvoir c’est moi” “I am the power”, Louis XIV) but in fact, this presidential power (higher in the French Constitution than the US President) is limited by the power of the street, this is not the case in Germany, where there is a political and economic consensus. Ms. Merkel knows the limit of power, she is not brilliant (as Macron), she is not outspoken (as Sarkozy), perhaps she is not a fashion model (Karl Lagerfeld was not happy with her attire!) but she runs the most powerful European country, and she maintains it. True she is a specialist in compromises which are the essence of Nordic countries and German coalition. Compromise is not the main quality in France (look at “gilet jaune”). She is not looking for an overextended role in the world scene, this is not the case of France. Some (bad people) use to say that the French travel in first class with a third-class ticket.


Now let’s have a look at German and French performance (the economy is not the strength of Mr. Frank). Germany during Merkel’s time has maintained her public finance in order (this is not the case of the US and France), it has integrated one million refugees without major disruptions, the economy is functioning rather well with full employment. The new Government will have to address some weaknesses not considered by Merkel.


1 Economic growth has been higher for Germany than France


Figure 1 Germany GDP per capita (PPP) has increased twice as fast in Germany as in France

Source: International Monetary Fund, World Economic Outlook Database, April 2021



2 The economic growth engine of Germany is based on exports


Figure 2 Germany has an external surplus during the whole Merkel’s period

Source: International Monetary Fund, World Economic Outlook Database, April 2021


Euro has served well Germany (but also the German efficiency and the quality of its products).


The German manufacturing sector accounts for about 20% of Germany’s GDP (it is 10% for France). Cars make up the biggest part of it.


Since 2016, China has been Germany’s biggest trading partner. There is a fear that Germany could become too reliant on the Chinese market.


Germany needs gas from Russia (Nord Stream 2) to substitute for its loss of coal and nuclear station in its transition period to renewables. It needs graphite and metals such as cobalt and lithium from China to power its auto industry’s EV makeover. China is a large market for German cars. The German economy is in these ways dependent on cooperation with the two most dangerous and powerful authoritarian regimes in the world. This represents a serious security challenge for the US-German and EU-German political cohesion and security cooperation. How the new German government handles this conundrum could well determine the future diplomatic relations of the EU.

The Merkel’s Governments regarded China as a strategic partner. Will the new one consider human rights consideration?


It is unlikely that in the future Germany will continue to run a continuous export boom to China.


Figure 3 Germany is exporting mainly to China

Source : FT: The Merkel era in charts, Sept. 20, 2021


Germany does not have an important industry in digitalization. The next German generation will have to consider some diversification of German car industry to other sectors such as digitalization.


3 Whatever Keynesians think, Germany is, thanks to its conservative fiscal policy, a credible country this is not the case of France


On the fiscal front, opinions differ, some think that Germany should make more deficit because its investments are weak and its external balance too high, this is true.


Figure 4 As a matter of facts, Germany has followed a Keynesian economic policy, it has made fiscal deficits during negative growth (recession) and has made surplus in normal time, this is not the case of France (permanent deficit).

Source: International Monetary Fund, World Economic Outlook Database, April 2021


4 The result of this prudent policy is that the public debt ratio was identical in 2005 for France and Germany, this year it reaches 115% of GDP for France and 70% for Germany


This will allow Germany to invest more and to run a moderate fiscal deficit, Germany has fiscal space, not France.


Figure 5 France and Germany have the same debt ratio in 2005, the debt ratio will be 115% of GDP in 2021 in France against 70% in Germany

Source: International Monetary Fund, World Economic Outlook Database, April 2021


Germany is a country run by a conservative leader without imagination, but has a lower debt ratio than France (thus lower fiscal deficit) and a higher rate of growth than France and which is more credible than France, bizarre.


Nevertheless, the role of Germany has been harmful when it has imposed excessive fiscal adjustment on Greece. Germany has forgotten that after the second WW her debt toward the allies was almost canceled (thanks to the smart US intervention) (London Agreement in 1953). Thanks to this agreement, German debt was 20% of its GDP in the 50s against 200% for most other European countries (cf. A. Ritschl, LES). Without this discreet debt cancelation would the exceptional German performance after the second WW be the same? The German Government of 2010 did not follow the generous offer given by the allies in 1953. This is the source of tremendous social pain for the Greek people. European countries should have forgiven a part of the Greek debt, simply because Greece cannot reimburse it. Merkel and Schäuble refused.


5 It is true that fiscal balance has been achieved thanks to low public investment


Figure 6 German public investments are weaker in Germany

Source : FT: The Merkel era in charts, Sept. 20, 2021


Some public infrastructure is falling apart. Digital investment is insufficient. The Chancellor Scholz has promised the “biggest industrial modernization of Germany” plus greening investments. He will have to square these ambitious objectives with the country’s debt brake. Expect some hot discussions between the high-spending Greens and the pro-fiscal rectitude FDP over spending priorities.


6 There is a constant gap of 10 points of GDP between, the public expenditure ratio of France and Germany


Figure 7 France spends more than Germany and does not have better performance on the social front

Source: International Monetary Fund, World Economic Outlook Database, April 2021


Figure 8 Thus taxes are higher in France than in Germany

Source: International Monetary Fund, World Economic Outlook Database, April 2021


France contrary to Germany has no fiscal space, it cannot continue to make fiscal deficits for more growth, more “social” expenditure, to have social peace, and for green investment, Germany has still fiscal room fort more investment.


The high level of taxes in France explains its high unemployment rate (see figure 9) and its relatively low rate of growth.


7 Merkel’s secret for her popularity, low unemployment rate (without systematic fiscal deficits)


Figure 9 In Germany, the unemployment rate drops from 11% of the labor force in 2005 to 4%, this is perhaps the reason why Ms. Merkel is popular. In France, the unemployment rate stays at 8%

Source: International Monetary Fund, World Economic Outlook Database, April 2021


The various Merkel’s governments have shown that it is possible to reconcile unemployment decline with an orthodox fiscal policy and that, contrary to Keynesian belief, fiscal deficit does not create jobs.


Figure 10 German employment rate is higher in Germany than France

Source : FT: The Merkel era in charts, Sept. 20, 2021


Job employment rate is higher in Germany than in France including for older people. In France the pension average year is 62, in Germany it will be 67 years old (the age of Ms. Merkel).


8 Germany received one million refugees and made the effort to integrate them, this is remarkable


Another thing not acceptable for the traditional right is that “she opened her country to over one million refugees from the wars of the Middle East.”


So some will ask, how it comes, in France the whole right (from Pécresse to Zemour) is in favor of restriction on emigration in France and you favor immigration in Germany (double standards?) Germany has a declining population and immigration (if people are really integrated) is not necessarily a bad thing. The French situation is different, France has already a lot of Muslims emigrants (5 to 6 million) (all are French citizens) some of them (not all) have considerable difficulties to integrate the French culture (which can be summarized by “laïcité” (no religion mix between church and state). This is not understandable by Anglo-Saxon culture which tolerates a mix between church and politics (in France the President will never swear oath on the Bible, in France there is no prayer in public school (public means state-run school).


France was plunged into grief by various murder attacks (cafés, concert hall (Bataclan), in newspaper room (Charlie hebdo). It is today extremely difficult to expel an illegal immigrant in Europe.


Figure 11 Large immigrants in Germany in 2015-2016

Source : FT: The Merkel era in charts, Sept. 20, 2021


9 Because of Germany’s energy choices, the country is emitting more carbon per head than any other big EU country


A. Merkel made an historic mistake when she closed Germany’s nuclear plants after the Fukushima nuclear explosion (2011), because of this decision Germany and Europe are dependent upon gas imported from Russia for electricity generation. If France takes back control its nuclear program, it could lead in Europe on electricity production (at a high price because nuclear generation is also expensive but is more reliable than electricity generated by wind turbines and solar panels).


Figure 12 In spite of her speech pro-green, Germany has poor performance in terms of greenhouse gases

The new government will have to say how to fill in the gap of the future demand for electricity from industrial and residential consumers facing a potential energy shortfall and rising prices without jeopardizing the export-driven economy. This is not wind turbines and solar panels which will supply the growing demand for electricity.


10 Regarding defense, Germany is under-armed and will always look toward the US for its defense


Germany thinks that defense should be the preserve of the US, Germany, most powerful European nation does not have the intention of shouldering much of the continent’s security. This is not the French position (nor the US one).


Figure 13 Germany military spending is weak

Source: Statista


Although France has a reasonable defense with a true army, it is isolated within Europe, most European countries look to the US and NATO for defense and arms procurement. European countries will always give preference to the US for the defense (the latest submarine contract is a good example). They prefer the strong US which can be careless and ruthless in its treatment of allies (see: Suez in 1956, the treatment of allies in the withdrawal of US troops from Afghanistan; and the treatment of France in the submarine deal are a reminder of what can happen to other “allies”).


European countries will always prefer to be dependent on the US for their defense rather from France “small” country with a tendency for hegemony. France is always preaching for more Europe, but for the Elysée “More Europe has always been more France”. French will be more credible if it had a strong and sustainable economy.


11 Demography can be the source of future decline


The German birth rate is one of the lowest in the world, the labor population is declining. According to TE, the Federal Agency for Employment considers that Germany needs 400 000 emigrants a year to meet the need for qualified labor workers.


Ms. Merkel leaves a country rich, democratic and confident; she has been looking for compromise and half measures. Her reign was marked by hesitations and slowness in decision-making (nothing could be done in Europe without her consent). Will the following Government do better? This is what we wish them.

Last note, for a French, a world leader shopping in the supermarket like anybody else is quite refreshing (I am looking for Macron going shopping).



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