Germany now faces a dark and difficult decade

Whoever becomes the next chancellor will face serious economic challenges, writes Hamish McRae

Tuesday 28 September 2021 21:30
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<p>German chancellor Angela Merkel waves after delivering a speech ahead of the German federal election</p>

German chancellor Angela Merkel waves after delivering a speech ahead of the German federal election

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Angela Merkel remains the German chancellor for a while yet – until some new coalition is stitched together – but already the knives are out. She is being attacked for being too indulgent towards Russia, or worse, allowing a potentially hostile country to establish control over its energy supplies with her support for the Nord Stream 2 pipeline.

Her decision to phase out nuclear power has made Germany’s electricity industry more reliant on coal and lignite, which last year supplied one-third of the country’s power. She has been criticised on many other issues, too.

But whatever view you take of her record, one thing stands out. The German economy has been a success story. Take unemployment. That was at 5 per cent on the eve of the pandemic, down from nearly 12 per cent in 2005 when she took office. Or Germany’s fiscal position. In 2005, the deficit was more than 3 per cent, breaking the level set in the EU Growth and Stability Pact. By 2019, the country was running substantial budget surpluses. Exports have been strong – with the country now the world’s largest exporter of cars and medicines – and Germany is running a huge export surplus.

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