dna edit: Angela Merkel's victory and EU's woes

German Chancellor Angela Merkel seems to be inhabiting a political realm entirely different from that of her beleaguered European Union peers. Her thumping win in the just-concluded German  elections gives her a third successive victory, catapulting her into the ranks of the most successful post-war German leaders. Remarkably, at a time when leaders around the Continent are struggling to keep public opinion on their side given the Eurozone’s economic woes, two of her victories have come after the global crisis’s advent in 2008. But while the German people plainly back the manner in which she has steered Germany through the economic quagmire of the past five years, other EU members are likely to be more wary — and justifiably so.

The moment of crisis when it seemed that a failing Greece would set off a domino-effect of economic implosions around the Continent is ostensibly over. But in real terms, all that means for the most part is that the bad news has moved off the front page. Southern Europe continues to be in a great deal of pain with unemployment rates in Spain and Greece hitting 25 per cent — and double that for the youth, raising the spectre of a ‘lost generation’ and spurring social unrest. Their own leaderships and poor economic policies bear some part of the blame, of course. But so does Merkel.

As the leader of the strongest economy in Europe, and consequently the loudest voice in the Continent, she has pushed austerity measures harsh enough to gut the social contract as conditions for bailouts in Greece and elsewhere. EU countries will, perhaps, push for a policy shift from her given that the pressure of winning the election is off her now —  forgiving some portion of Greece’s debt, for instance, accepting easier terms for debtor countries and boosting domestic German demand.

If so, they are likely to be disappointed. Strict fiscal prudence, an export-driven economy and low inflation are part of Germany’s economic DNA. Unfortunately, Berlin is making the mistake of assuming that the same recipe will work for other European countries.

Germany’s model of export-driven economic success has been made possible only by the fact that there are other countries willing to absorb its goods and thereby operate at a deficit. It would be an economic impossibility for them to now follow the German example.

There is some scope for a slight course correction, however. Merkel may have won handsomely, but her party, the Christian Democratic Union, will still need a coalition partner. At the moment, that seems likely to be the Social Democrats, former coalition partners during her first stint as Chancellor. Given that they were burnt by that partnership — their share of the vote went down in the 2009 elections — they are likely to drive a hard bargain this time around. Among other things, that could mean a minimum national wage, boosting domestic demand; there is also a possibility they will be inclined to agree to ease terms for other EU nations. The vital question for Europe is just how much they can dilute the Christian Democrats’ austerity-driven economic policies.