Angela Merkel’s admirers maintain that circumspection is her greatest political strength. The German people, they say, are wary of politicians touting grand visions. Change must be incremental and orchestrated by a leader whose values the electorate trusts. The chancellor’s detractors see things differently. To them, Ms Merkel is a politician without purpose, who garners popularity and power for their own sake and lacks the courage to do or say what she thinks right. It is to be hoped that Ms Merkel’s supporters are correct.
The coalition agreement reached yesterday between Ms Merkel’s conservative alliance and the centre-left Social Democratic party is not so much a programme for government as an assortment of overtures to favoured interest groups. If the agreement is ratified by the SPD’s members, optimists expect Ms Merkel to call the tune as the coalition takes shape. A more pessimistic view is that, by failing to insist on bold governing principles, she has squandered an unprecedentedly strong opening to the third act of her premiership.
Germany’s resilient economy and its agenda-setting power in Brussels conceal problems that urgently need to be addressed. An ageing population will one day make its welfare system unaffordable. Its sclerotic services sector is propped up by protectionism and restrictive practices. Germany’s competitiveness owes as much to low wages as to productivity. These weaknesses restrict the country’s potential and the contribution it could make to recovery beyond its borders. The continent’s largest economy has the rare luxury of time. But that is no excuse for complacency.
Ms Merkel once recognised that Germany could not afford to stand still. But, since campaigning in 2005 on a reform programme that she balked at implementing in office, she has gone quiet about how the country needs to change. Aside from a new minimum wage – included at the SPD’s insistence – little in the coalition agreement will help fix the structural flaws in the German economy.
On the contrary, there are several backward steps. Reducing the retirement age from 67 to 63 for those who have been in work for 45 years will shrink the labour force and increase the welfare bill. Curbs on short-term employment, intended to give temporary workers a better deal, risk discouraging hiring. Rent controls will stifle the investment needed to alleviate housing shortages, making it harder to move between cities. Ms Merkel regularly admonishes countries such as Greece for failing to reverse wrong-headed policies such as these. She should not agree to them at home.
The chancellor has won a more resounding endorsement from German voters than any politician for a generation. She has a stronger hand than the SPD, who are nursing deep wounds. Yet if Ms Merkel is to capitalise on this strength and vindicate the optimism of her supporters, she will have to discover some of the reforming zeal that she urges on less fortunate counterparts.
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