DER BUNDESTAG SHAKEUP

 

DER BUNDESTAG SHAKEUP

Written by: Marissa Tay Kai Fang

Edited by: Anmoldeep Singh Karwal

 

 

Angela Merkel commands presence with every room she enters. Her charisma has guided her through her years in politics. She seems to have it all – TIME Person of the Year 2015[2], Forbes’ list of most powerful people in the world (twice)[3], and the title of Europe’s power-broker[4]. What she does not seem to have now, is the approval ratings from the Germans.

 

AS IT HAPPENED

The market was taken aback when Merkel held a press conference on Monday afternoon. She announced the resignation of her role as leader of the Christian Democratic Union (CDU), and she will not be renewing her term in the Bundestag when 2021 arrives. This comes after the CDU underperformed in Sunday’s state election in Hesse.

Markets were reflective of investors’ sentiment towards the breaking news. For instance, the Euro depreciated against the US Dollar to its lowest of 1.1341 on Monday’s trading session[5].  Her decision also comes amidst negotiations for a smooth Brexit transition, where the past weeks have seen British Prime Minister Theresa May engaging in heated discussions with Brussels over the Irish Border Control. Only recently did the two parties come to a consensus for a possibility of a Brexit deal due on November 21[6].

THE MERKEL METHOD

 

 

Figure 1: Germany’s unemployment rate from 1991 to 2019F[7]

Germany’s unemployment rate has been on a downtrend since Merkel took office in late 2005. The unemployment rate in September 2018 was a 38-year low of 3.4% and fell approximately 0.2% compared to a year-on-year basis[8]. Germany’s economy has consistently outperformed other countries in the European Union (EU), serving as the largest contributor to the EU’s GDP. Germany’s exports have increased 2.2% for a year-on-year basis for August 2018, achieving its highest value of €118 billion in March 2017[9].

The Mittelstand is a key driver and the pride of the German economy. It comprises of small and medium-sized enterprises (SMEs) operating in the manufacturing industry, with its employability contributing to 80% of the country’s workforce. As these SMEs tend to be family businesses, they would be most vulnerable to inheritance taxes imposed upon them. Merkel has been an advent supporter of the Mittelstand, spearheading revisions made to inheritance taxes to ensure the longevity of German’s manufacturing growth[10].

Figure 2: Germany’s manufacturing industry contribution to GDP (%), 2005-2017[11]

 

A day after her press conference, she announced the launch of development funds as part of the G20’s ‘Compact with Africa’ initiative. These investments amount to a total of €1 billion and serve as the next step of Germany’s ‘Marshall Plan with Africa’ announced back in 2017. The aim was to utilise German investments for help build infrastructure and a stronger workforce[12], as well as establish stronger bilateral relations and trade[13]. Perhaps under Merkel’s continued watchful eye, Africa would be able to build upon the economic opportunities yet to be discovered at home.

 

MUTTER MERKEL, MOMMY MERKEL

Merkel will have served 16 years in office as Germany’s Chancellor when 2021 approaches if she is able to stand the test of time. Even though her successor has yet to be named, analysts predict that as the far-right movement continues to gain traction across the rest of Europe, so will German politics[14].

Needless to say, Angela Merkel is a woman who holds an immense amount of authority. Her rise to power in German politics is inspiring to many. As part of her address to the British Parliament in 2014, she remarked how “Europe will not move forward by leaps and bounds, but by steps and steps”. Despite facing numerous criticism and contradictions, there is no doubt Merkel has made her impact in the Fatherland, the EU and around the world. The Merkel era shall continue to be monitored until its maturity.

 

 

 

 

 

 

 

 

REFERENCES:

 

[1] UNIAN, (2018). Speaking of Crimea, Merkel recalls history of GDR. [online] Available at: https://www.unian.info/politics/2125464-speaking-of-crimea-merkel-recalls-history-of-gdr.html [Accessed 31 Oct. 2018].

[2] Gibbs, N. (2018). Why TIME Chose Angela Merkel as Person of the Year 2015. [online] TIME.com. Available at: http://time.com/time-person-of-the-year-2015-angela-merkel-choice/ [Accessed 31 Oct. 2018].

[3] Topping, A. (2018). Angela Merkel clings to top spot in Forbes 100 most powerful women list. [online] Available at: https://www.theguardian.com/world/2017/nov/01/angela-merkel-theresa-may-forbes-100-most-powerful-women-list [Accessed 31 Oct. 2018].

[4] Barker, A. , Brunsden, J. and Hall, B. (2018). https://www.ft.com/content/04387222-db8c-11e8-9f04-38d397e6661c. [online] Financial Times. Available at: https://www.ft.com/content/04387222-db8c-11e8-9f04-38d397e6661c [Accessed 31 Oct. 2018].

[5] Tappe, A. and Kollmeyer, B. (2018). Euro slips as traders digest Merkel comments, dollar eyes best month since May. [online] MarketWatch. Available at: https://www.marketwatch.com/story/euro-drops-recovers-as-reports-say-german-chancellor-angela-merkel-will-step-down-as-party-leader-2018-10-29 [Accessed 31 Oct. 2018].

[6] Ross, T. and Wishart, I. (2018). U.K. Expects Brexit Deal With EU by November 21, Dominic Raab Says [online] Bloomberg LP. Available at: https://www.bloomberg.com/news/articles/2018-10-31/u-k-expects-brexit-deal-with-eu-by-nov-21-dominic-raab-says [Accessed 31 Oct. 2018].

[7] Speciale, A. and Randow, J. (2018). Merkel Legacy Is a German Jobs Boom for Europe’s Star Economy. [online] Bloomberg LP. Available at: https://www.bloomberg.com/news/articles/2018-10-29/merkel-legacy-is-a-german-jobs-boom-for-europe-s-star-economy [Accessed 31 Oct. 2018].

[8] Tradingeconomics.com. (2018). Germany Unemployment Rate | 1949-2018 | Data | Chart | Calendar | Forecast. [online] Available at: https://tradingeconomics.com/germany/unemployment-rate [Accessed 31 Oct. 2018].

[9] Tradingeconomics.com. (2018). Germany Exports | 1950-2018 | Data | Chart | Calendar | Forecast | News. [online] Available at: https://tradingeconomics.com/germany/unemployment-rate [Accessed 31 Oct. 2018].

[10] Family Capital. (2018). Angela Merkel won’t let tax kill the Mittelstand | Family Capital. [online] Available at: https://www.famcap.com/2014/12/2014-12-18-german-law/ [Accessed 31 Oct. 2018].

[11] World Bank, (2018). Manufacturing, value added (% of GDP) | Data. [online] Available at: https://data.worldbank.org/indicator/NV.IND.MANF.ZS?end=2017&locations=DE&start=2005&view=chart [Accessed 31 Oct. 2018].

[12] Escritt, T. (2018). Merkel looks to Africa to cement a legacy shaped by migration. [online] Reuters. Available at: https://www.reuters.com/article/us-germany-politics-merkel/merkel-looks-to-africa-to-cement-a-legacy-shaped-by-migration-idUSKCN1N40VM [Accessed 31 Oct. 2018].

[13] Pelz,D. and Janjevic, D. (2018). Chancellor Angela Merkel holds Berlin summit for Compact with Africa project [online] DW. Available at: https://www.dw.com/en/chancellor-angela-merkel-holds-berlin-summit-for-compact-with-africa-project/a-46065155 [Accessed 31 Oct. 2018].

[14] Posener, A. (2018). Angela Merkel’s successor could be bad news for a post-Brexit Europe [online] The Guardian. Available at: https://www.theguardian.com/commentisfree/2018/oct/29/angela-merkel-successor-bad-news-post-brexit-europe-german [Accessed 31 Oct. 2018].