Angela Merkel’s historic election as Germany’s first female chancellor marks the pinnacle of a meteoric political career for the former East German physicist. But seven years of rule by Gerhard Schröder, her predecessor, has left her a challenging economic legacy and little margin for error.

Third quarter growth figures for Europe’s largest economy released yesterday showed that after five years of stagnation, Germany’s economy is locked in a schizophrenic phase. On the one hand the country’s robust exports, which rose 4.7 per cent from the second quarter, are finally translating into stronger investments, up 2.2 per cent.