Asssessing Angela Merkel's Legacy

Angela Merkel’s chancellorship is ending. It is time for an evaluation. She has ruled Germany since 2005. After the election in September 2017 she began her fourth term, yet in October 2018, she abdicated as the chairman of her political party, the CDU (Christian Democratic Union). She indicated that she may resign also from the chancellorship and make room for a successor. Meanwhile, Merkel has received very benevolent treatment from the media, as she is the first female chancellor of Germany, and has earned additional sympathy because she grew up in the Eastern part of the country when it was under Soviet rule and a socialist economy. But her legacy is mixed. On the surface, her achievements seem impressive. Yet a closer look behind at the performance of the German economy reveals that she excelled at the art of deception.

Macroeconomic Performance

During her time at the helm, the German economy has shown a formidable macroeconomic performance, first, with employment. After a rise in unemployment from 1975 to 2005, which lifted the unemployment rate from 1 percent to over 10 percent, the rate declined during Merkel’s time in office and has come down to 3.3 percent as of the end of 2018.

Figure 1: Germany. Official unemployment rate, 1950–2018

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Source: tradingeconomics.com

The decline of the unemployment came along with an expanding workforce and a rise of the labor participation rate. Under Merkel’s chancellorship, the German economy experienced a swift recovery of the crisis of 2008 and after 2010 could register steady annual growth rates of around 2 percent. After the period of weak growth before the crisis of 2008 and the turbulence during the financial crisis, the German economy moved back to its long-term growth trend.

Stability of the price level was another mark of the German economy during Merkel’s chancellorship although Germany is part of the eurozone, and the European Central Bank gets the final sayin monetary decisions. Nevertheless, price-level stability serves as a criterion for the economic performance of a national government, and most of the period of Chancellor Merkel’s time in office, Germany’s core inflation rate has oscillated within the small range of between 1 and 2 percent annually over her years in office.

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Antony P. Mueller is a German professor of economics who currently teaches in Brazil. See his website www.capitalstudies.org or ...

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