Mecklenburg-Vorpommern Economy

Merkel’s legacy for Germany in the charts

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In 2011, Chancellor Angela Merkel visited the process engineering laboratory in the chemical plant of Dow Olefinverbund GmbH in Schkopau near Merseburg.

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It is hard to believe that Germany, the largest and most successful economy in Europe, was known as the “sick man of Europe” in the late 1990s and early 2000s.

Germany’s economy has grown under the leadership of outgoing Chancellor Angela Merkel, the Conservative leader who has headed the government for 16 years. In 2019, before the Covid-19 pandemic broke out, a quarter (24.7%) of the total gross domestic product of the European Union was generated by Germany, according to Eurostat.

During Merkel’s tenure, CNBC created five charts that deal with different parts of the German economy and society. They show that their legacy is not just wealth, but also missed opportunities and missteps, according to some policy experts.

GDP

Germany’s export-oriented economy, which is heavily dependent on the manufacturing industry, has grown steadily during Merkel’s tenure, as this graph shows, and has left its competitors in Great Britain and France far behind.

When Merkel came to power in 2005, one must not forget that Germany’s economy had gone through a recession two years earlier. In the year she took office, Germany’s gross domestic product was 2.3 trillion euros. Show data from the German Federal Statistical Office. In 2020 it was over 3.3 trillion euros.

The coking plant of the German industrial group ThyssenKrupp am Rhein in Duisburg, West Germany in 2019.

INA FASSBENDER | AFP | Getty Images

unemployment

According to the World Bank, the unemployment rate has also fallen from 11.1% in 2005 to 3.8% in 2020 while Merkel is in office.

Germany has one of the lowest unemployment rates in the EU (although not the lowest, this award goes to its neighbor, the Netherlands). Nevertheless, the unemployment rate in Germany is respectably low; In July 2021, the unemployment rate was 3.6%, while it was higher for under-25s at 7.5%. Show Eurostat data.

Goldman Sachs analysts evaluating Merkel’s legacy found that while Merkel had “great success” in lowering the unemployment rate, “much of the decline in structural unemployment was likely due to her predecessor’s (Gerhard Schroeder) reforms and a decade followed “. of stagnating real wages. “

Angela Merkel visits a steelworks in Georgsmarienhütte, Germany, on August 30, 2005.

Thomas Imo | Photo library | Getty Images

At that time, Merkel’s governments “maintained solid state finances and passed the constitutional debt brake, but reacted vigorously in times of crisis and successfully shielded the labor market in 2008 and 2020 with” short-time work “, according to the analysts.

Short-time work refers to Germany’s short-time work regulation, in which employers reduce the working hours of their employees instead of dismissing them in times of crisis such as the Covid pandemic.

immigration

One area in which Germany differs greatly from its counterparts France and Great Britain is the immigration landscape under Merkel. And maybe it is precisely in this area that your law firm has generated both praise and controversy.

Syrian and Iraqi migrants sleep on train tracks waiting to be processed across the Macedonian border on September 2, 2015 in Idomeni, Greece. Since the beginning of 2015, the number of migrants on the so-called “Balkan route” has exploded, as migrants from Turkey come to Greece and then travel on via Macedonia and Serbia before entering the EU via Hungary. The number of people leaving their homes in war-torn countries like Syria is the largest migration since World War II.

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At the height of the European migration crisis in 2014-2015, hundreds of thousands of migrants came to the EU, many of whom fled the civil war in Syria. Disputes broke out within the bloc about how asylum seekers can be fairly distributed between EU states, with Eastern European countries largely rejecting and closing their borders.

Merkel made the bold decision to do the opposite by opening Germany’s borders and allowing more than an estimated 1 million refugees and migrants to enter Germany in 2015, a move that is reflected in the graphic below. Eurostat’s immigration data only go back to 2008.

Merkel’s migration policy at the time was seen as a catalyst for right-wing voters to flock to the anti-immigrant party Alternative for Germany. However, by 2021, their share of the vote had fallen, with the party hitting 10.3%.

Available income

The disposable household income in Germany has also risen steadily. When she first took over the chancellery in 2005, household incomes in Germany, Great Britain and France weren’t that different, but over time the gap has widened and Germany is ahead.

In Germany, the adjusted gross disposable income per capita of households was EUR 30,142 in 2019, EUR 25,155 in the United Kingdom and EUR 26,158 in France. according to Eurostat data.

One topic that is highlighted in the discussion about household income in Germany is the growing gap between rich and poor. In particular, a divergence between east and west of the country, which reflects a legacy from the time before the reunification of Germany in 1990.

In 2020, the OECD found that the differences between the German regions in terms of per capita GDP have decreased over the past 18 years, but “the regional differences between the OECD countries are still above the median OECD countries, with Hamburg having more than twice the GDP per capita “. as Mecklenburg-Western Pomerania (a neighboring country). “

Shoppers browse items for sale in a gift shop in Mannheim, Germany.

Krisztian Bocsi | Bloomberg | Getty Images

As Euromonitor International noted in a September report, “Despite income growth and initiatives to promote income equality, there are still regional disparities between East and West Germany.”

Public investment

One of the main criticisms of Merkel’s government is that it has neglected infrastructure spending and investment because of its apparent unwillingness to borrow and messed up its strict adherence to a balanced budget the now infamous “black zero†budget rule, which is a symbol of Germany’s obsession with the need to save.

The decaying infrastructure in Germany has been attributed to this lack of spending, and the government has been widely criticized for reducing borrowing and spending at a time when it could have borrowed cheaply in the low interest rate environment. Others criticized Germany’s lack of spending and the lower demand from Germany had led to imbalances in the eurozone.

“The failure of the German government (among other things) to engage in debt-financed spending after the 2008 and 2011 crises has largely contributed to the chronic lack of private demand, a distorted savings and investment balance, and distorted global and intra-euro trade imbalances Zone, “said Stefan Koopman, chief market economist at Rabobank, in a statement.

A nationwide election poster for the Christian Democratic Union (CDU) near a building site in Berlin-Mitte in 2021. After years of little investment in public infrastructure, there is broad consensus among all political parties that more will be needed in the coming decade.

Bloomberg | Bloomberg | Getty Images

The following graph shows the inconsistent level of gross investment (formerly known as gross domestic investment) in Germany, the UK, and France since 2005.

Capital formation consists of spending on investments in the fixed assets of the economy such as land improvement, as well as plant, machinery and equipment purchases, roads, railways and the like, including schools, offices and hospitals.

Investing in such an infrastructure is what Germany’s next government needs to address, say experts.

It is well known, however, that Germany cannot hold back much-needed infrastructure spending much longer, and as coalition talks take place to form a new government, much attention is being paid to how far each party involved could push fiscal easing.

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