Merkel aims to win at home as Europe is cast adrift

Dr Angela Merkel.

The people of Germany have made up their minds. With just under a month to go before their general election, Chancellor Angela Merkel's conservatives are well ahead in the polls. And no other living German politician is as popular as Dr Merkel.

The electoral campaign has been so boring that the only whiff of excitement came when Dr Merkel's husband recently admitted that the Chancellor's cooking skills are far from perfect. Apparently she's not generous with the toppings on her streuselkuchen, a traditional German crumb cake.

Yet despite this outward image of domestic calm and predictability, the German elections are far from predictable.

The outcome is being watched with anticipation in Europe and the United States as those who will govern Europe's biggest economy and the policy choices they make over the next few years will not only determine the shape of the European continent but also decisively affect the Americans who, notwithstanding their pivot to Asia, still need a strong European partner to get things done.

Seldom before has a national election campaign been so uneventful and yet so globally important.

Germany's voters are still divided over the wisdom of offering hundreds of billions of euros in credit guarantees to other European nations which faced bankruptcy. Some believe this was a terrible waste of money, while others found it essential to avert the worst economic disaster since the 1930s Depression. Yet few Germans grasp the conclusion obvious to any outside observer: that by becoming Europe's paymaster, Germany has also transformed into Europe's top decision-maker.

One explanation for this peculiar German amnesia is the way Europe's financial crisis is seen in Germany. Not as a systemic problem but as a morality play between work-shy Greeks or Portuguese and hard-working Germans, who supposedly toil from morning to night, saving every cent but suddenly told at gunpoint to surrender their hard-earned piggybanks.

Like all myths, this one contains a grain of truth. Yet it obscures some very important realities, including the fact that far from being fleeced for cash, Germany is, at least for the moment, a huge net beneficiary of Europe's financial crisis.

Gains from crisis

Because investors ran away from lending to others, Germany was able to borrow cash at almost no cost. The Kiel Institute for the World Economy, one of the country's top think-tanks, has estimated that the German government saved a cool ยค80 billion (S$137 billion) between 2009 and 2013 as a result. And thanks to the crisis, Germany solved another perennial problem - its shortage of unskilled labour; 370,000 workers from recession-struck Europe poured into Germany over last year alone. But ordinary German voters don't see this: They believe their country is being treated as a bountiful cow, milked at will by Europe.

Another reason most Germans don't perceive themselves as influential is that their country's economic performance, while widely admired, is not as stellar as it seems. Notwithstanding the last few years of impressive growth, achieved largely on the back of booming demand for German engineering goods from China and Russia, Germany experienced one of the lowest cumulative growth rates of any European Union country over the past decade.

Much of its current success is due to a series of reforms introduced a decade ago which ultimately increased German competitiveness by depressing wages. The result is the largest pool of low-cost workers in Europe: At least one in five of all German employees is currently defined as a low earner. The real hard work - eliminating regulation in the services sector, twice as large as the industrial one but largely cosseted and inefficient - still remains to be done. Although Germany's superb precision engineering, its low unemployment rates and its enviable apprenticeship programmes for youngsters remain second to none, the fact remains that most ordinary German workers don't feel flush or on top of the world.

Costly legacy

But the biggest explanation why Germany has failed to match its economic power with commensurate political influence is history. Given the country's awful recent past, German politicians go out of their way to be meek, and have elevated into an intricate form of art the concept of never appearing to lead.

This approach had its uses - as convincing proof that Germany no longer sought domination and thus healed old wounds. This allowed Europe to cooperate and permitted Germany itself to prosper. Germany's reticence and national modesty are still important traits today. Which other nation would have offered huge credits to another only to then say nothing when, instead of gratitude, it just got abused in return? That was precisely what the Germans experienced with Greece and bore it without complaint.

That is also how some of Chancellor Merkel's closest colleagues want matters to stay. "The idea that Europe should be - or even can be - led by a single country is wide of the mark," wrote German Finance Minister Wolfgang Schaeuble in a recent article published in European newspapers. "Europe does not lend itself to a leader."

But that is a classic German example of running away from a difficult political problem by burying it in politically correct speech. The reality is that the days when Germany could simply sit back and let the others do most of the running are over.

In what would surely go down in history as one of Europe's most ironic twists, the euro single currency project, conceived precisely to contain German power, has failed in its fundamental objective. Chancellor Merkel's initial response to this has been a piecemeal approach of offering cash in return for belt-tightening austerity policies in the rest of Europe. Although this staved off a financial disaster, it has done nothing to lift the continent out of recession and has imposed unacceptable social costs on ailing nations.

European retreat

More importantly, the German public is now turning away from the European project. So standing still is no longer an option. But moving in any other direction cannot be accomplished without German leadership.

The same applies to broader international security issues. For decades, the Germans were content to leave Britain and France with their permanent UN Security Council seats to strut on the global stage, dispatching troops to various operations, while the Germans went on making money. But that no longer works as the British and the French have lost both the capabilities and the appetite for such adventures. The US realises this and is courting Germany as the only European state able to shoulder future international security burdens. It was noticeable that during his recent trip to Europe, US President Barack Obama chose Berlin, the German capital, for his major security speech.

Would Chancellor Merkel, if re-elected, realise that power means responsibility and that this, in turn, requires Germany taking a lead?

Dr Merkel faces an immediate problem: the fragmentation of her country's political scene. Germany's post-war Constitution was drafted with the objective of minimising the number of political parties in Parliament. For a while, it worked as intended: The Socialists, Dr Merkel's Christian Democrats and the centrist Liberals alternated in power.

Divided politics

But the forthcoming elections on Sept 22 could end up with no fewer than six parties in Parliament, many of them small and politically incompatible. So, although Dr Merkel towers above them all, she may be forced into a coalition government she does not want and cannot control. Paradoxically, just when Germany is at the peak of its power and importance, it could also end up being at its most divided domestically.

Yet even if coalition-forming proves easier, many experts still doubt that any German politician is capable of exercising global power. "Don't expect strategic leadership from Germany," former German foreign minister Joschka Fischer told a recent meeting of European foreign policy experts. The eminent German philosopher Juergen Habermas got even more personal: He attacked Dr Merkel's inability to understand her country's global impact by rudely dismissing the Chancellor as the "sleeping beauty".

Either way, more than just Dr Merkel's home baking skills are likely to be sorely tested soon after the ballots. The cautious Dr Merkel may yet realise there is no alternative to exercising global responsibilities. Without a clear steer, Germany may soon face the traditional predicament once described by German historian Ludwig Dehio as being "too weak to dominate the continent, but too strong to be reined in within it".

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