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Merkel’s caution has made Germany the great economic underachiever of our times

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Germans are taking to the polls on September 26 to elect the members for the 20th Bundestag. For the first time in 16 years, there will be a new chancellor as Angela Merkel steps down. Germany has been through some enormous challenges during her tenure, including the global financial crisis, European sovereign debt crisis and the COVID-19 pandemic, and many commentators have praised her quiet efficiency.

The polls are predicting gains for the Social Democrats (SPD), who have been the junior coalition partner to Merkel’s Christian Democratic Union (CDU) since 2013, but no party is expected to achieve a landslide victory. The SPD’s Olaf Scholz is the most likely successor to Merkel. He is already finance minister and vice chancellor in the outgoing administration, so the German political landscape looks unlikely to change drastically.

Yet the Germans would arguably benefit from changing their approach to running the economy, because it has not fared brilliantly under Merkel – and this would apply regardless of how the election turns out. The chart below, which shows what has happened to key indicators like growth, inflation and unemployment during her tenure, shows a very mixed picture.

Germany’s economy under Merkel

On the one hand, the fact that prices have been so static and most people have been in work are signs of a well run economy. Yet GDP growth has been quite low – and surely lower than it could have been given that Germany has been running large trade surpluses and also either surpluses in the public finances........

© The Conversation

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