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Sunday, October 17, 2021

Decoding Angela Merkel (Part 2): From Eurozone debt to migration crisis, how Germany’s ‘climate chancellor’ responded to challenges

Angela Merkel has long been considered the 'leader of the free world' but whether her approach is dictated by democratic values or opportunism is unclear

Written by Mira Patel | Mumbai |
October 8, 2021 9:47:36 am
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Angela Merkel was sworn in as Germany’s first female Chancellor during the tail end of 2005. Since then, she has demonstrated steady, often understated leadership through a series of crises, including the 2007 financial crisis and proceeding Eurozone debt crisis, the Fukushima disaster, the 2015 migration crisis and finally, the rise, and pervasion of authoritarianism across the region. While Merkel also faced significant challenges in dealing with the Covid-19 pandemic, the results of her response will only be clear in the years to come.

The first part of this series dug into the life and personality of Merkel. They defined her tenure as Chancellor and shaped her approach towards critical issues.

In Part 2, we will look at the challenges she faced and how she responded to them.

2007-08 financial crisis

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In 2005, Germany had an unemployment rate of 11 per cent and was frequently derided as the “sick man of Europe.” Two years later, the global financial crisis hit, sending several countries across Europe into a downward economic spiral. Merkel’s policies during the crisis along with her business-friendly approach in the years that followed transformed Germany into the fourth largest economy in Europe with a high standard of living, almost full employment, and historic budget surpluses. However, despite these successes, Markus Ziener, professor of journalism in Berlin and the current Helmut Schmidt Fellow of the German Marshall Fund, told indianexpress.com that Merkel largely benefited from the economic policies put in place by her predecessor. The economic reforms in labour and welfare that were instituted by Gerhard Schröder made the country more competitive, but by the time the rewards could be reaped, Merkel had already taken over.

More than her domestic economic policies, Ziener said Merkel will be remembered for how she handled the Eurozone debt crisis that wreaked havoc on the economies of several southern European countries. Merkel and other EU leaders faced a choice between bailing out member states like Greece and Ireland or allowing them to default on their loans, which were largely owed to German, Dutch and French banks. Initially Merkel was reluctant to commit to a bailout fund, a facet of her famously methodical and risk-averse style of leadership. After pressure from other European leaders, she finally agreed to a plan for the European Central Bank to prevent a sovereign debt default by buying bonds in exchange for southern European countries adopting strict austerity measures.

Merkel has faced subsequent criticism for that from both sides of the aisle. On the one hand, southern European countries resent the harsh austerity policies imposed by Berlin and on the other, several northern European countries wanted defaulters like Greece to be kicked out of the Eurozone altogether.

In an article for Foreign Policy Magazine, Matthias Matthijs and R. Daniel Kelemen, grade Merkel harshly for her decision making during the Eurozone crisis. Matthijs and Kelemen assert that Merkel’s narrative was to blame the defaulting countries for “fiscal profligacy and lagging competitiveness” thus creating a “morality tale of Northern saints and Southern sinners.” Instead, they argue, “real leadership would have required acknowledging and addressing the structural roots of the Eurozone woes—pointing out that fiscal and banking crises were inevitable in a monetary union where capital flowed freely in the absence of adequate joint mechanisms to coordinate fiscal policy, regulate financial services, or facilitate macroeconomic adjustment.”

However, if Merkel’s policies were detrimental to Germany’s neighbours, they greatly bolstered an already robust German economy whose manufacturing base and exports significantly benefited from a weakened Euro. Moreover, the approach backed by Merkel essentially allowed core countries to provide financial bailouts to peripheral countries which were then used to pay out German banks, a strategy described by Matthijs and Kelemen as a “kind of money laundering.” Matthijs and Kelemen are inclined to criticise Merkel for her opportunism but if viewed through the prism of national interest, Merkel’s policies helped transform Germany into the economic powerhouse it is today.

The Fukushima disaster

Known somewhat unsuitably as the “Climate Chancellor”, Merkel presided over some of the most sweeping climate policies in Germany’s history. In 2011, days after the Fukushima disaster, Merkel, who had previously supported nuclear energy, reversed her stance, and announced that Germany would transition away from nuclear energy by 2022. Like many of her calculations, this was a shrewd political manoeuvre that drew widespread support from politicians and the general public. Most Germans had been against nuclear energy since the Chernobyl meltdown in 1986 that left a radioactive cloud over the country’s Northern territories. Merkel also had to contend with the Green Party which had just secured a strong result in regional elections and were strongly opposed to nuclear energy as well.

While Merkel’s decision may have been popular, it also came with a set of challenges. Germans overwhelmingly consider climate change to be a real, man-made threat. In order to transition away from nuclear, Merkel had to present a proposal that would eventually lead to Germany deriving most of its energy from renewable sources. At the time, Germany was already witnessing a surge in renewable energy production, largely due to two policy initiatives that preceded her tenure. Those included an EU energy liberalisation mandate that broke up powerful utility companies, and a German legislation that guaranteed feed-in tariffs for people investing in renewable energy. However, Germany’s main sources of renewable energy still came from wind and solar, which are notoriously fickle in Germany’s volatile climate.

Today, 56 per cent of Germany’s electricity still comes from conventional energy sources (including nuclear) and 27 per cent of the total comes from coal alone. Moving away from coal has in turn required Merkel to rely on a controversial pipeline from Russia called the Nord Stream 2. Merkel’s record on climate change definitely doesn’t justify her moniker but there are some successes that she can be credited with. The country passed its first national climate law in 2019, setting targets for individual sectors which are also in line with EU targets spearheaded during Merkel’s tenure as president of the bloc. She has also passed legislation to phase out coal by 2038, an ambitious target compared to the standards set by countries like India, but ultimately far less impactful than those adopted by Germany’s contemporaries in Europe.

2015 Migration crisis

Typically known for her tepid remarks, in 2015, Merkel displayed an unusual degree of strength in declaring Germany as a safe haven for refugees fleeing violence in the Middle East. Humanitarians across the globe praised her for her generosity in agreeing to welcome an unprecedented one million refugees into Germany. However, like most of her decisions, this too was calculated and, in many ways, overblown by her admirers in the international press.

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According to Sameer Patil, a Fellow at the International Security Studies Programme at Gateway House, who spoke with indianexpress.com, while Merkel was one of the few leaders who adopted a pro-refugee stance, what’s often forgotten is how much the aging German workforce benefitted from an influx of workers, especially talented workers coming from countries like Iran. However, Merkel had to balance those economic considerations with other trade-offs. Many European countries resented Germany’s open borders, claiming that refugees aiming to enter Germany often settled in neighbouring countries instead. Moreover, there was significant domestic blow-black surrounding the move which in turn fuelled the rise of the far-right Alternative for Germany (AfD) party. In 2017, following a spate of high-profile terrorist attacks, the AfD won 12.5% of the national vote and for the first time in the party’s short history, secured seats in the Bundestag.

In response to these security challenges, Merkel all but reversed her policy by signing a controversial deal with Turkey, providing Ankara with enormous incentives in exchange for halting the flow of migrants into Europe. Merkel also tried to limit asylum applications from Africa by adding Algeria, Morocco, and Tunisia to the list of countries considered safe, and later, launched a social media campaign to deter refugees from Syria from fleeing to Europe. According to Patil, this policy of deterrence remains in place today. “Merkel is focused on limiting violence by stopping refugees and migrants in Asia and Africa from leaving the region,” he said. While her immigration policy is ambiguous at best, Patil notes that Merkel was forced into a balancing act. “She had to consider the economy as well as national security,” he said, and given those considerations, “she actually did a very good job.”

European security

Britain’s exit from the EU leaves France and Germany as the bloc’s only two military superpowers. On issues related to security, including the threat posed by Russia and China, and the rise of autocratic regimes in Poland and Hungary, Merkel’s response has once again been soberly pragmatic. Germany currently spends $50 billion on defence, far more than most European countries but also considerably less than the two per cent of GDP mandated under the NATO agreement. Patil attributed Merkel’s unwillingness to spend more on defence to uncertainty over where the money would be spent. “Like with the other European leaders, Merkel would have to answer to her electorate on where the additional money would go,” he said. “Would it be spent on border control, on Russia, on building domestic capacity – the EU doesn’t have an answer to this, so in many ways, her hands are tied.”

Some would disagree with Patil’s assessment that Merkel maintained the status quo in terms of security, pointing to the fact that Merkel ended military conscription in 2011 and failed to upgrade Germany’s aging defence systems. Additionally, by encouraging migration, Merkel is responsible for a sharp increase in violence domestically. According to German crime statistics, migrants are disproportionately involved in violent crimes including murder, manslaughter, assault and rape. Merkel’s failure to properly integrate migrants into German society – only half the people who have come to Germany since 2013 have paid employment – will also likely result in an increase in crime, especially given that migrants are more likely to be laid off during the pandemic. Extremism festering in migrant communities would pose a threat to both Germany and the rest of the international community.

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Merkel has also been accused of taking a relatively soft position on Russia, despite being seen as a worthy adversary to Putin. In an article for Foreign Affairs Magazine, Constanze Stelzenmüller, details the extensive list of Russian transgressions that have occurred on Merkel’s watch. They include “Russia’s annexation of Crimea, its ongoing proxy war in Ukraine, its disinformation and propaganda operations in German social media, the 2015 hack of the Bundestag servers, the 2019 murder of a Chechen political refugee in Berlin, the 2020 attempted murder of the Russian opposition politician Alexei Navalny, and Moscow’s support for the brutal crackdowns on mass demonstrations in Belarus.”

Despite calls from the US to stake a more aggressive position against Russia, Merkel has thus far refused to play her strongest card by suspending the enormous pipeline project, the Nord Stream 2, which brings Russian natural gas to Germany. Merkel can be forgiven for making that trade-off however, as Germans are especially inclined towards passivity following their role in the two World Wars and, because Russian natural gas is an essential tool in reducing Germany’s reliance on coal.

According to Patil, Merkel was also caught between two opposing approaches when it came to Russia. She had to go along with both the policy of the EU and the policy of the US, which were often in conflict with each other. As such, he says, “Merkel has neither improved nor worsened Germany’s relationship with Russia.”

Merkel has also tacitly endorsed the recent actions of Communist Party in China by pushing through a Chinese-EU investment deal, despite growing concerns from the international community. The relationship is complex, argued Patil as China and Germany are all at once strategic rivals, competitors, and partners. Germany must maintain its access to Chinese markets while also curbing expanding Chinese investments in German firms. According to Ziener, “Merkel clearly saw the dangers that come with the rise of China but at the same time she understood that China’s rise was inevitable. She never talked about a “decoupling” from China because she was well aware how important the Chinese market is for the German economy, in particular if you look at exporting cars and machinery. The many human rights issues with regard to China, Merkel addressed only cautiously.”

Merkel’s self-serving approach towards authoritarian leaders in Hungary and Poland is similarly rooted in economic considerations. She has been a crucial defender of Hungary’s far-right leader, Viktor Orban, going as far as to ally with his party in the European Parliament. Both Hungary and Poland are low-wage manufacturing centres for German multinationals and while the likes of Orban manipulate and extort small and medium size businesses, they extensively court large German automakers such as Audi, Mercedes, and BMW.

Ultimately, according to Ziener, Merkel is a “true European” who would do anything to keep the EU together. “On this backdrop Merkel understood the importance of keeping the Union together, even against headwinds from Poland and Hungary. Is there a red line that, once overstepped, would lead to an exit of Warsaw and Budapest from the EU? Probably. However, Angela Merkel would consider this step as the absolute last resort and do whatever she could to avoid such a scenario.”

In fact, it is Merkel’s commitment to the EU that history will likely remember her for. She has served as the moral and practical voice of the EU throughout her tenure as Chancellor, resisting ambitious French attempts to expand the Union and refusing to allow Britain a no-deal exit. She also supported the EU’s $826 billion pandemic recovery fund in May 2020 by allowing the bloc to raise common debt in capital markets for the first time in its history. Her bailouts of southern European countries, while controversial, also prevented states from either defaulting on their loans or leaving the EU, both of which would have weakened the Union. Additionally, Merkel has often acted as Europe’s foil to Russia, and is notably the one of the few people that Putin grudgingly respects. Her humanitarian response to the refugee crisis was a mixed bag but it was also a rare display of moral leadership at a time when countries were solely prioritising national interests.

In an era dominated by the bravado of Trump, Putin, Modi and Bolsenaro, Merkel’s even-handed, rational and cerebral approach to governance has often seemed like a breath of fresh air. She may not have been the most memorable figure, nor the most ambitious, but when it mattered, Merkel successfully managed to be the adult in a room dominated by volatile personalities.

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